than 20 countries annual report 2004

protecting values

THE HARTMANN WORLD

Annual Report 2004• Hartmann’s revenue for 2004 came to DKK 1,642

million, up 8% from the level in 2003.

• The main drivers of revenue growth were organic activity growth in the Group’s divisions Industrial Packaging (+21%) and Egg & Fruit Packaging Eu-rope (+6%). The development in revenue includes the full-year effect of Hartmann’s own production in North America (+36%).

• The Group posted a consolidated operating re-sult which reflected a clearly unsatisfactory loss of DKK 118 million. This figure consists of a ne-gative contribution to the result of DKK 162 mil-lion from North America (incl. DKK 56 million in goodwill write-down), DKK 94 million in positive contribution to the result from other business activities and DKK 50 million in one-off costs from measures relating to the Focus Plan (re-structuring).

• Result after tax reflected a loss of DKK 122 million. At the Annual General Meeting the Board of Directors will propose that no dividend be declared for 2004.

• Adjusted for one-off items, Hartmann posted an operating result of DKK -12 million and a net result of DKK -27 million, and this is on a par with the le-vels stated in the original opening forecast which

stipulated DKK -15 million and DKK -30 million respectively.

• The implementation of the Focus Plan is proceeding as planned. The Group has closed down its food packaging activities, and the efforts to achieve efficiencies in the European production organisation are on track. Efforts to divest Skjern Papirfabrik A/S are proceeding.

• Cash flows from operating and investment activi-ties in 2004 totalled DKK -32 million against DKK -101 million in 2003, up DKK 69 million. Cash flows from operating and investment activities in 2H 2004 were positive with an amount of DKK 38 million.

• Return on invested capital (ROIC) came to -11%. Adjusted for restructuring and North America ROIC came to more than 11%.

• The forecast for 2005 includes an operating result for the Group of approx. DKK 50 million. The Group expects a profit after tax of approx. DKK 25 mil-lion, including the effect of DKK 20 million from an expecteddivested minority shareholding in Cemosa in Spain.

• In connection with the implementation of its Focus Plan the Group has updated its financial targets (see the details on p. 22-25 of the Annual Report).

MAIN EVENTSThe Group has production sites in 10 countries

and sales companies and offices in more than 20 countries

Contact addresses are on page 79 and on the Group’s website

www.hartmann.dkH

AR

TM

AN

N A

NN

UA

L R

EP

OR

T 20

04

Production sites

Operating result affected by one-off cost items with an overall negative effect of DKK 106 million

• DKK 56 million in goodwill write-down re North America (no liquidity effect)

• DKK 50 million deriving from the Focus Plan (DKK 25 million in liquidity effect)

Operating result of DKK 94 million for the rest of the Group

• Result increased 18% from 2003 (DKK 79 million)

• One of the best operating results achieved in the past 10 years with a return on invested

capital (ROIC) of more than 11%

Operating profit 2004 in brief

Consolidated operating profit DKK -118 million

Clearly unsatisfactory

A negative operating result in North America of DKK 106 million

Brødrene Hartmann A/S

Klampenborgvej 203

DK-2800 Kgs. Lyngby

Denmark

Phone: +45 45 87 50 30

Fax: +45 45 87 78 58

E-mail: [email protected]

http://www.hartmann.dk

CVR-nr. 63 04 96 11

Hartmann-PPMArgentina S.R.L.,

Argentina

Hartmann Embalagens Montes Claros Ltda.,

Brazil

HartmannCanada Inc.,

Canada

Hartmann-Schwedt GmbH,Germany

Hartmann-Mai Ltd.,Israel

BrødreneHartmann A/S,Denmark

Hartmann Hungary LCC,Hungary

Hartmann papirnaambalaža d.o.o.,

Crotia

Skjern Papirfabrik A/S,Denmark

Hartmann-Varkaus Oy,Finland

HartmannMalaysia Sdn. Bhd.,Malaysia

Hartmann Embalagens do Brasil Ltda.,Brazil

protecting values

THE HARTMANN WORLD
















www.hartmann.dk

HA

RT

MA

NN

AN

NU

AL

RE

PO

RT

2004

Production sites













Klampenborgvej 203

DK-2800 Kgs. Lyngby

Denmark

Phone: +45 45 87 50 30

Fax: +45 45 87 78 58



CVR-nr. 63 04 96 11


Argentina


Brazil


Canada






Crotia





CON TENTS

Financial highlights and key figures 3

To Hartmann’s stakeholders 4

Group profile 6

Management report 2004 8

Facts about the divisions 16

Egg & Fruit Packaging Europe 16

Egg & Fruit Packaging North America 17

Egg & Fruit Packaging South America 18

Industrial Packaging 19

Outlook 2005 20

Strategy and targets 2005-2007 22

Risk Management 26

Sustainable development 30

The management of the Hartmann Group 32

Investor relations 34

Board of Directors and Group Executive Committee 38

Annual accounts 43

Accounting policies 44

Statement by the Board of Directors & the auditors 48

Income statement 49

Balance - assets 50

Balance - liabilities 51

Cash flow statement 52

Movement in capital and reserves 53

Segment information 54

Notes 55

Financial highlights and key figures per quarter 76

HARTMANN GROUP DIRECTORY

DEFINITIONS OF KEY FIGURES

Total short-term assets – receivable in corporation tax – cash at bank and in hand – pension obligations – prepayments from customers – trade creditors – payable to associates – provisions – other debt

NWC + property, plant and equipment + intangible assets + deferred tax asset + receivable in corporation tax – deferred tax - government grants – corporation tax

Share in profit/loss for the year to Group

Average no. of shares

The calculation of EPS, diluted is adjusted for outstanding share options

Share in profit/loss for the year to Group × 100

Average capital and reserves

EBIT

Average invested capital

Operating profit × 100

Revenue

Capital and reserves at year-end

No. of shares (less treasury shares) at year-end

Listed price

Earnings per share (EPS)

Total amount paid out in dividend × 100


Interest-bearing debt (net) × 100


Cash flows from operating activities

Average no. of shares (less treasury shares)

Net working capital (NWC)

Invested capital (IC)


Return on equity

Return on invested capital

Profit margin (EBIT)

Carrying amount per share

Price earnings

Pay-out ratio

Gearing

Cash flow per share

International financial reporting standardsThe Annual Report 2004 has been prepared in ac-cordance with the International Financial Reporting Standards (IFRS) and any further reporting require-ments for listed companies.

Forward-looking statementsThe forward-looking statements in this report re-flect the current expectations of the Management of Brødrene Hartmann A/S with regard to future events and the Group’s financial performance. Statements about 2005 will inevitably be subject to uncertainties causing the actual development to dif-fer from the expectations.

Factors that might affect such expectations include a.o. – but not limited to – developments in business

trends and the financial markets, changes in legisla-tion and regulations in the markets where Brødrene Hartmann A/S has activities, changes in the demand for products and in the competitive environment, and insufficient quantities of raw materials for the production. See also the section on Risk Manage-ment on p. 26.

The Annual Report appears in both a Danish and an English version.

In case of discrepancies between the two texts, the Danish text shall

prevail.

All trademarks, trade names and other designations emphasized in

this report/brochure are trademarks protected by and belonging to

Brødrene Hartmann A/S.

© 2005 Brødrene Hartmann A/S

Layout Black Pencil Photos Niclas Jessen and Morten Bjarnhof Print Interprint Paper Galerie art silk. Cover 300 g. Contents 150 gPrinted with vegetable-based ink by printing house with environmental certification and EMAS registration.

The key figures were prepared in accordance with „Recommendations and key figures 2005“ from Association of Danish

Financial Analysts (ADFA). This means an adjusted definition of working capital where tax items are no longer included

in the balance. Furthermore, return on capital is solely called ROIC, not ROCE. Other conditions unchanged.

Head office:


Klampenborgvej 203

DK-2800 Kgs. Lyngby, Denmark

Phone: +45 45 87 50 30

Fax: +45 45 87 78 58



Production plants:

Europe:Brødrene Hartmann A/S

Hartmannsvej 2

DK-6270 Tønder, Denmark

Phone: +45 74 72 85 00

Fax: +45 74 72 85 29


Hartmann Hungary LLC

HU-2941 Ács, Ipar út 1, Pf.:2,

Hungary

Phone: +36 34 595 100

Fax: +36 34 595 101


Hartmann papirna ambalaža d.o.o.

Dravska bb

HR-48000 Koprivnica, Croatia

Phone: +385 48 658 800

Fax: +385 48 658 808


Hartmann-Schwedt GmbH

Kuhheide 32

DE-16303 Schwedt/Oder

Germany

Phone: +49 3332 26550

Fax: +49 3332 265529


Hartmann-Varkaus Oy

Satakunnankatu 10

PO Box 265

FIN-78201 Varkaus, Finland

Phone: +358 2046 1460

Fax: +358 2046 32 146


Skjern Papirfabrik A/S

Birkvej 14

DK-6900 Skjern, Denmark

Phone: +45 97 35 11 55

Fax: +45 97 35 09 09


North and South America:Hartmann Canada Inc.

58 Frank Street

P.O. Box 1328

Brantford, Ontario N3T 5T6

Canada

Phone: +1 519 753 8427

Fax: +1 519 753 8142


Hartmann Embalagens do Brasil Ltda.

Estrada das Pitas, 431

CEP 18087-190

Sorocaba, S.P., Brazil

Phone: +55 15 3238 3200

Fax: +55 15 3228 2733


http://www.hartmannbrasil.com.br

Hartmann Embalagens

Montes Claros Ltda.

Rua H. Andersen, 311

Bairro Industrial

CEP 39404-005

Montes Claros, M.G., Brazil

Phone: +55 38 3222 7616

Fax: +55 38 3222 7476

Hartmann-PPM Argentina S.R.L.

Ruta Nac. 151 - Km. 0,5 - C.C.92

AR-8324 Cipolletti

Rio Negro, Argentina

Phone: +54 299 478 1567

Fax: +54 299 478 2343


Middle and Far East:Hartmann-Mai Ltd.

10 Haorzim Street

Industrial Zone

P.O.B. 13456

IL-42138 Nathanya, Israel

Phone: +972 9 862 1845

Fax: +972 9 862 4467


Hartmann Malaysia Sdn. Bhd.

PLO 548, Jalan Keluli 11

Kawasan Perindustrian Pasir Gudang

81700 Pasir Gudang

Johor, Malaysia

Phone: +60 7 253 2200

Fax: +60 7 252 3300

E-mail: jen@hartmann-malaysia.

com.my

Sales offices:

Europe:Hartmann France S.a.r.l.

Le Bailliage du Roi

3, rue du Bailliage

FR-78000 Versailles, France

Phone: +33 1 39 51 21 41

Fax: +33 1 30 21 50 83


http://www.hartmann-france.fr

Hartmann Ltd.

Serbia & Monte Negro

S&CG-21000 Novi Sad

Olge Petrov 32, Srbija i Crna Gora

Phone: +381 21 474 0768

Fax: +381 21 474 0769


Hartmann Polska Sp. z o.o.

ul. Mala 5

PL-66-400 Gorzów Wlkp.

Poland

Phone: +48 95 7 28 19 82

Fax: +48 95 7 28 19 84


http://www.hartmann-polska.pl

Hartmann (UK) Ltd.

Exchange House

Exchange Square

Beccles

Suffolk NR34 9HH, England

Phone: +44 1502 71 71 01

Fax: +44 1502 71 38 31


Hartmann Verpackung AG

Buggenrain 5

CH-6043 Adligenswil-Luzern

Switzerland

Phone: +41 41 370 7038

Fax: +41 41 370 7028


http://www.hartmann-suisse.ch

Hartmann Verpackung GmbH

Hauptstrasse 71-79

DE-65760 Eschborn, Germany

Phone: +49 6196 9320

Fax: +49 6196 932 109


http://www.hartmannverpackung.de

North and South America:Hartmann-PPM Argentina S.R.L.

Av. Alicia Moreau de Justo 1750, 1-B

Puerto Madero

AR-1107 Buenos Aires, Argentina

Phone: +54 11 4314 1032

Fax: +54 11 4314 1027


William L. Berndt

Key Account Manager

1631 Stratton Pond Lane

Schaumburg, Illinois 60194

Phone: +1 847 466 5444

Fax: +1 847 466 5854


Scott M. Davis

Key Account Manager

10 East Trillium Circle

The Woodlands, Texas 77381

Phone: +1 409 273 3368

Fax: +1 409 273 3369


Jannik Holm

Vice President Sales & Marketing

1 Hartfield Boulevard

East Windsor, CT 06088

Phone: +1 860 831 0023

Fax: +1 860 831 0026


Middle and Far East:Nihon Hartmann K.K.

August House 3F

3-23-5 Uehara

Shibuya-ku

Tokyo 151-0064, Japan

Phone: +81 3 3465 3011

Fax: +81 3 3465 3380


Peter High

Sales Agent

High Marketing Ltd.

P.O. Box 109 582, Newmarket

Auckland 1031, New Zealand

Phone: +64 21 999 892

Fax: +64 21 650 205


Richard Liu

Key Account Manager

Rm 301, #500

Xiang Yang South Road, Shanghai,

China, Zipcode 200031

Phone: +86 21 54 65 68 36

Fax: +86 21 64 73 66 03


Loh Lim Hock

Key Account Manager

Suite 39.1.13

No 39, Jalan Kenari 17C

Bandar Puchong Jaya

47100 Puchong

Selangor Darul Ehsan, Malaysia

Phone: +603 8076 7606

Fax: +603 8070 7907

E-mail: llh@hartmann-malaysia.

com.my

Jaime G. Joson

Key Account Manager

No 8 Evangelista St. Maliksi 1, Bacoor

Cavite, The Philippines

Phone: +63 46 417 7612

Fax: +63 46 417 7209

E-mail: jgj@hartmann-malaysia.

com.my

Wara Kamchaisatian

Manager

134/2 Charoenmuang Road

Rongmuang, Pathumwan

Bangkok 10330, Thailand

Phone: +66 1833 1910

E-mail: wrk@hartmann-malaysia.

com.my

3

2004 2003 2002 2001 2000

Income statement (DKKm)

Revenue 1,642 1,525 1,408 1,415 1,353

Operating profit before depreciation (EBITDA) 84 143 168 210 196

Operating profit before goodwill amortisation (EBITA) -56 35 61 92 77

Operating result (EBIT) -118 29 58 85 73

Adjusted operating result (EBIT adjusted for restructuring and goodwill amortisation North America) -12 29 58 85 73

Adjusted operating result (EBIT adjusted for restructuring and North America) 94 79 64 85 73

Interest income and expense and similar items (net) -29 -30 -34 -20 -22

Profit/loss before tax (EBT) -147 -1 24 67 57

Share in profit for the year to Group (EAT) -122 1 21 47 37

Cash flows (DKKm)

Cash flows from operating activities 74 100 53 123 155

Cash flows from investment activities -107 -201 -186 -65 -141

Cash flows from financing activities 55 75 -31 82 -73

Total cash flow 23 -26 -164 140 -59

Investments in tangible fixed assets 105 197 155 95 134

Balance (DKKm)

Total assets 1,504 1,593 1,477 1,561 1,475

Capital and reserves 580 696 717 823 830

Interest-bearing debt (net) 491 458 348 209 254

Working capital 124 172 179 187 167

Invested capital 1,060 1,162 1,074 1,040 1,078

Key figures (%)

Operating margin (EBITDA) 5.1 9.4 12.0 14.8 14.5

Operating margin (EBITA) -3.4 2.3 4.3 6.5 5.7

Profit margin(EBIT) -7.2 1.9 4.1 6.0 5.4

Tax rate 16.8 33.0 26.8 29.2 31.9

Return on invested capital (ROIC) -10.6 2.6 5.5 8.0 7.0

Adjusted return on invested capital (ROIC adjusted for restructuring and North America) 11.3 8.5 6.3 8.0 7.0

Financial gearing 84.7 65.8 48.6 25.4 30.7

Return on equity -19.2 0.1 2.7 5.7 4.6

Other figures

Average no. of employees 2,593 2,363 2,224 2,093 2,062

Earnings per share (EPS) in DKK -35.9 0.2 6.2 13.8 10.9

Cash flow per share in DKK 21.7 29.4 15.6 35.9 45.5

FINANCIAL HIGHLIGHTS AND KEY FIGURES - A 5-YEAR RECORD

The key figures were prepared in accordance with „Recommendations and key figures 2005“ from Association of Danish Financial Analysts (ADFA).The comparative figures have been adjusted to the change in reclassification.See the back flap for definitions of key figures. For further share-related key figures, see under ’Investor relations’, p. 34.

HIGHLIGHTS AND KEY FIGURES

4

A difficult year because of North America

Hartmann’s international strength and market position were not reflected in the results achieved during the year. 2004 proved to be a very difficult year for the Group, and many good and forward-looking achieve-ments were dwarfed by the disappointing development in our activities in North America.

Hartmann’s business in North America turned out to be a far bigger challenge than anticipated, and looking back we now realise that many things should have been handled differently.

A new management team was appointed in North America in May 2004, and it has achieved progress in all areas by means of tight cost control, targeted marketing initiatives and improvements in production. However, there is still a long way to go, in particular in relation to production where the outcome of current nego-tiations with the trade union is crucial to Hartmann’s continued commitment. Primarily, the development in the exchange rate between the Canadian and the Ame-rican dollar forced us to write down goodwill relating to North America at the end of the year.

Our North American activities are a growth area and, as such, they still play a central role in the Group strategy.

However, I wish to make it absolutely clear that there are limits to our patience.

The other three core areas are still on track. The Euro-pean egg and fruit packaging division achieved steady revenue growth and posted a fine operating result in 2004. The division for industrial packaging fulfilled its ambitious targets for growth and result. And for the second year in a row our South American activities achieved strong growth in result, posting a small profit in a fiercely competitive market – an important mile-stone for our turnaround efforts in South America.

The Focus PlanIn the summer of 2004, Hartmann performed a mid-term evaluation of the five-year strategy launched in 2002. The evaluation clearly showed that the original financial targets could not be met. Against this back-ground we decided to adjust our business strategy for the purpose of growing profitability in the short term, and we made two important strategic decisions which became engrained in the Focus Plan of August 2004.The first decision was to strengthen egg and fruit pack-aging activities in Europe by means of major cost reduc-tions. The second decision was to end or divest those activities that are not within our absolute core business.

TO HARTMANN’S STAKEHOLDERS2004 was a difficult year for Hartmann as the disappointments in North America over-shadowed the rest of the Group’s activities. Now, we will focus on our core competencies and consolidate Hartmann to restore profitability throughout the Group.

TO HARTMANN’S STAKEHOLDERS

5

Following up on these decisions, we closed down our food packaging production and began looking for a new owner for Skjern Papirfabrik A/S. The initiatives con-tained in the Focus Plan had an adverse effect of DKK 50 million on the Group result in 2004, but already in 2005 the first yearly improvements of DKK 30 million will be reflected in the Group’s result.

Hartmann emerges from this exercise as a more focused business capable of mustering all available resources and competencies in its efforts to strengthen activities with-in moulded-fibre packaging for eggs, fruit and industrial products while, at the same time, getting the business in North America back on track.

Adjusting the strategy and strengthening Group Management Based on the above mid-term evaluation, the Group decided to work according to a three-year strategy period, from 2005 to 2007, in which focus will be on con-solidation and earnings. We will concentrate our business development on the main activities within egg and fruit packaging and industrial packaging, and we decided to intensify our efforts to improve the processes relating to production, innovation and service. The financial targets for 2007 include revenue of DKK 1.6 bn-plus, an operating profit of minimum DKK 120 million, and a profit after tax of minimum DKK 60 million. ROIC – return on invested capital – is forecast to be above 10% in 2007.

To make sure that the strategy is efficiently implemented in all parts of the Group we have decided to initiate a further strengthening of the Group Management. In late 2004 a new international group management team was established – the GEC (Group Executive Committee) – which is composed so as to ensure representation of all four core business areas at top management level (see p. 40-41). Based on the wish to further support activities that secure Hartmann’s position within technology, inno-vation and processes, the GEC will be extended to inclu-de a new technical director (Chief Technology Officer).

Outlook for 2005Fiscal 2005 will be characterised by efforts to achieve the necessary operational improvements in North America, but it will also be a year in which the initiatives of the Focus Plan will begin bearing fruit. We expect the Group

to generate a consolidated profit of approx. DKK 50 million and a profit after tax of approx. DKK 25 mil-lion, which includes a profit of DKK 20 million from an expected sale of a shareholding in Cemosa.

2004 has been a difficult year because of North Ame-rica. Even if the situation in North America is still dif-ficult, considerable improvements have taken place in 2H 2004. At the same time, we are pleased that the rest of the Group has shown fine performances above expectations at the beginning of 2004.

I wish to thank all the employees of Hartmann for their dedicated and extraordinary efforts in 2004, and I look forward to continuing our good cooperation in 2005.

March 2005

Asger DominoPresident & CEO

TO HARTMANN’S STAKEHOLDERS

6

Core business areasBrødrene Hartmann A/S posted revenue in 2004 of DKK 1.6 billion, and this makes it one of the world’s biggest manufacturers of moulded-fibre packaging. It also makes it the only global actor focusing exclusively on sales, development and production of moulded-fibre pack-aging. The Group’s activities are concentrated in four core business areas accounting for 86% of the revenue:

• Egg & Fruit Packaging Europe, which is the Group’s original and largest business area contributing 57% of revenue in 2004

• Egg & Fruit Packaging North America, which is the Group’s most recent business area contributing 9% of revenue in 2004

• Egg & Fruit Packaging South America contribu-ting 8% of revenue in 2004

• Industrial Packaging for products such as mobile phones, consumer electronics and household appli-ances. The area is rapidly growing and contributed 12% to consolidated revenue in 2004

ProductsHartmann’s packaging products are made of moulded fibre. Moulded fibre is an environmentally-friendly ma-terial that is extremely well suited for providing cost-effective protection of fragile goods such as e.g. eggs and electronics.

Moulded fibre consists primarily of natural wood fibres which are a renewable and, hence, a sustainable resource. The basic ingredient in moulded fibre is recycled paper which is collected, cleaned and processed to make it a uniform, fluid mass. The mass is moulded, dried and pressurised to make packaging in simple or complex shapes, often to be provided with labels or print.

Hartmann is further developing its technological plat-form on an ongoing basis, and the Group’s current pro-duction equipment for moulded fibre is among the wor-ld’s most advanced and efficient production systems.

GROUP PROFILEIt is Hartmann’s target to be the leading supplier globally of moulded-fibre packaging.

��

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Geographical distribution of revenue

Distribution of revenue on product categories

One of the world’s biggest manu-facturers of moulded-fibre packaging• Consolidated revenue in 2004: DKK 1.6 billion• 95% of the Group’s production is sold outside

Denmark• 11 production plants in Europe, North America,

South America and Asia• More than 20 sales and representative offices

worldwide• 2,579 employees at 31 December 2004

Business activities• Egg and fruit packaging (74% of revenue in 2004)• Industrial packaging (12% of revenue in 2004)• Other activities (14% of revenue in 2004)

Owners• Hartmann is listed on the Copenhagen Stock Ex-

change and is included in the Small Cap+ segment• The Brødrene Hartmann Foundation holds 20%

of the company’s share capital and 62% of the voting rights

• ATP* and LD** hold together 25% of the share capital and 12% of the voting rights (see on p. 35 for more details on owners)

GROUP PROFILE

* ATP = the Danish Labour Market Supplementary Pension Scheme** LD = the Danish Employees’ Capital Pension Fund

7

InnovationHartmann is the leader in the global market for innova-tion and development of moulded-fibre packaging. The Group’s innovative and new products allow customers to differentiate themselves from other suppliers, and this creates added value for customers and Hartmann alike. The ability to maintain this leading position is crucial to the Group’s efforts to expand and maintain its market position, and this is reflected in the Group’s extremely targeted investments in product development and design.

Customers and market Hartmann’s principal customer segments are retail chains, egg-packing stations and major industrial enter-prises. The Group forecasts growth in the market for moulded-fibre packaging in coming years driven a.o. by factors such as the steadily growing consumer focus on sustainable packaging.

VisionWe wish to create a truly outstanding company achiev-ing growth within environmentally-sound packaging – globally.

MissionHartmann’s mission is expressed concisely in the Group’s mission statement “Protecting values” – to provide protection for values in the widest possible sense.

Strategy and objectivesIn 2004 Hartmann decided to adjust its business strat-egy for the purpose of improving profitability in the short term (see p. 22-25). The strategy period was prolonged until 2007, and business development was targeted towards a consolidation of the Group’s main activities within egg and fruit packaging and industrial packaging. Accordingly, focus will be on improvements in processes relating to production, innovation and ser-vice. The financial targets for 2007 include a revenue of DKK 1,600 million-plus, an operating profit of minimum DKK 120 million and a profit after tax of minimum DKK 60 million. Return on invested capital (ROIC) is esti-mated to reach above 10% in 2007.

Sustainable developmentEfforts to promote sustainable development are an in-tegral part of Hartmann’s activities. Accordingly, Group activities build upon the principle of minimising the

direct and indirect cost to society (defined as the human and environmental costs) that may arise out of business activities in the product chain. To Hartmann, the pro-motion of sustainability is a fundamental consideration – in its manufacturing processes, in its products and in its dialogue with suppliers and customers.

Read more about Hartmann’s perception of sustainable development on p. 30

Further information on Hartmann’s va-lues, management systems, products, customers and organisation on the Group’s website, www.hartmann.dk

GROUP PROFILE

8

MANAGEMENT REPORT 2004

Follow-up on financial targets in 2004

With a growth rate of 8%, Hartmann posted total reve-nue for 2004 of approx. 3% above expectations. Revenue came to DKK 1,642 million against expectations of ap-prox. DKK 1,600 million. The operating result (before one-off cost items) came to DKK -12 million, and this was on a par with expectations which included a loss of up to DKK 15 million. Compared to expectations, the actual operating result reflected a higher loss from North America, but this was offset by a higher contribu-tion from the rest of the Group.

The Group returned a net result (before one-off cost items) of DKK -27 million, and this was on a par with expectations which included a loss of up to DKK 30 million.

One-off costs cover two main items: restructuring costs and write-downs in connection with the implementation of the Focus Plan, and write-down of goodwill in relation to North America. These main items came to a total of DKK 106 million before tax of which DKK 25 million has a liquidity effect.

Follow-up on operational objectives in 2004

Hartmann fulfilled its most important operational objec-tives for 2004, the only exception being the objective of achieving satisfactory operations at the newly erected production plant in Canada. The development of profit-ability in the Group’s division in North America was not satisfactory in 2004.

MANAGEMENT REPORT 20042004 proved a difficult year because of Egg & Fruit Packaging North America. The rest of the Group developed satisfactorily, and restructuring activities have been initiated to ensure further improvements. In 2H 2004 the Group has generated a positive liquidity of DKK 38 million.

Operational objectives Fulfilment See also

Further improvements in operational efficiency at the plant in Tønder

YES p. 10

Continued growth in sales of the most profitable packaging types, Superface and imagic

YES p. 10

Continued earnings growth in Industrial Packaging YES p. 11

Continued improvement in result in South America YES p. 11

A capacity utilisation of 90% by year-end 2004 at the new production plant in Canada

NO p. 10

Closure of the old production plant in Canada YES p. 10

DKKm Actual 2004 Forecast 2004* Actual 2003

Revenue 1,642 1,600 1,525

Operating result (EBIT) before one-off cost items -12 -15 29

- contribution hereto from:

North America -106 -90 -50

Other activities 94 75 79

Financing expenses, net 29 35-40 30

Tax, net before one-off cost items 25 25 0

Result, net before one-off cost items -27 -30 1

*) Forecast announced in Annual Report 2003, 22 March 2004

Fulfilment of financial targets 2004

9


The combined performance of the other three core business areas – Egg & Fruit Packaging Europe, Egg & Fruit Packaging South America and Industrial Packaging – reflected progress above the expected level. After allowing for one-off cost items and the effect of North America, Hartmann’s operating result for 2004 is one of the best results achieved over the past ten years.

The Focus PlanIn August 2004, Hartmann decided to initiate a reorga-nisation of the Group’s business structure based on a wish to ensure the strictest possible management and business focus on the four core business areas. The reorganisation, which is summarised in the Focus Plan, consists of three main elements:

1. A closure of the business area for food packaging (dualpack)2. A reduction of fixed costs in Egg & Fruit Packaging Europe3. The divestment of Skjern Papirfabrik A/S

The total positive effect on the consolidated operating result of these three initiatives is estimated to be DKK 30 million per year already from 2005. The implementa-tion of the plan will have an adverse effect on operating costs of DKK 50 million and on the liquidity with DKK 25 million in 2004 due to e.g. staff reductions and the depreciation of a number of long-term assets. The Focus Plan is described in more detail in Stock Exchange Release no. 10/2004 (Report for 2Q 2004) of 26 August 2004.

4Q 2004Hartmann posted total revenue in 4Q 2004 of DKK 434 million, unchanged from the year-earlier level of DKK 429 million. Not unexpectedly, the revenue growth

achieved by Egg & Fruit Packaging Europe of 8% (DKK 19 million) and by Industrial Packaging of 18% (DKK 9 milion) was offset by a DKK 27 million decline in reve-nue in Hartmann Technology, whereas revenue contri-butions from the other business areas totally rose DKK 13 million.

In 4Q 2004 Hartmann achieved a negative operating result of DKK 49 million including DKK 56 million in goodwill write-down in North America. Adjusted for this one-off cost item, the Group achieved an operat-ing profit of DKK 7 million against DKK 11 million in the same period last year. The decline is attributable to Hartmann Technology, which posted the expected de-cline in operating result of DKK 13 million. The remai-ning part of the Group achieved a net increase in result of DKK 9 million.

The items ’Interest income and expense and similar items’ and ‘tax’ reflected the expected developments, and the Group posted a breakeven in 4Q 2004 (before goodwill write-downs) compared to a profit of DKK 3 million in 4Q 2003. Inclusive of the goodwill write-downs, the net result was negative in an amount of DKK 56 million.

Cash flows from operating and investment activities in 4Q 2004 stood at DKK 35 million against DKK 43 mil-lion last year. The development in liquidity was primarily attributable to a higher level of investments in 4Q 2004 compared to the year-earlier period.

The development in cash flows is considered satisfac-tory, and in 3Q as well as 4Q the Group posted positive cash flows from operating and investment activities de-spite the negative results in North America.

2004 2003

DKKm 1Q 2Q 3Q 4Q Total 1Q 2Q 3Q 4Q Total

Revenue 433 385 390 434 1,642 376 344 376 429 1,525

Operating profit/loss -5 -17 -47*) -49**) -118 16 -4 6 11 29

Adjusted operating profit/loss before restructuring and North America 29 18 23 24 94 21 4 22 32 79

Profit/loss for the period -8 -14 -45 -56 -122 6 -6 -3 3 1

Revenue and development in result by quarter

*) Operating profit/loss Q3 2004 includes restructuring costs and write-downs of DKKm 50 **) Operating profit/loss Q4 2004 includes write-down of goodwill re North America of DKKm 56

10

A breakdown of financial highlights and key figures, seg-ment information and income statement on quarters for the years 2003 and 2004 is available on p. 76-78. Other financial figures for 4Q 2004 are available on the Group’s website on www.hartmann.dk.

Developments in the Group’s 4 core business areas

Egg & Fruit Packaging EuropeHartmann’s European activities generated revenue of DKK 940 million in 2004 (contributing 57% of consol-idated revenue). Besides being 6% above the year- earlier level (DKK 888 million), this is also above the total growth rate in the market and reflects the Euro-pean activities’ ability to gain market shares in 2004 in a fiercely competitive market.

Despite the fiercely competitive environment, Hartmann succeeded in maintaining – and, in some cases, increasing – its sales prices in the European market. Also, the distri-bution of sales on products resulted in an improvement in the average sales price, the main driver being strong growth in sales of the technically demanding premium products imagic and Superface.

In 2004, the division implemented the planned measures to improve production efficiency, in particular at the larg-est plant in Tønder, and it also increased its production capacity for premium products. The higher level of acti-vity has caused an increased in overheads.

The measures also enabled the division to achieve growth in its EBIT contribution of 5%, to DKK 94 mil-lion, and profit margin (EBIT) was maintained at the level of 10%.

The Group’s Focus Plan involved a reduction of some 50 jobs in Europe.

Simultaneously with the Focus Plan, initiatives were launched to establish a joint European production orga-nisation capable of realising the potential for synergies in planning, production, purchasing and quality assurance at the division’s six production plants. The implementa-tion of the new organisation is on track and the Focus Plan is expected to achieve cost reductions in Europe of DKK 20 million annually already beginning in 2005.

Egg & Fruit Packaging North AmericaThe North American division posted DKK 144 million in revenue in 2004, accounting for 9% of consolidated revenue. This reflected an increase of DKK 38 million over last year, mainly due to the full-year effect of the establishment of the new production plant in Ontario, Canada in the summer of 2003.

In August 2004, the Group carried out the planned closure of its old Canadian production plant. The closure involved the transfer of some 100 employees to the new plant. However, the running-in of the new plant is still giving rise to problems resulting in insuf-ficient production levels, and it has not been possible to reach a production capacity utilisation of 90% by the end of 2004.

After the appointment of a new local management team for the division in the spring of 2004, the utilisation of production capacity has risen considerably. There was also a general improvement in operations thanks to comprehensive rationalisation initiatives, staff reduc-tions, the renegotiation of several supplier and service contracts, technical improvements, and the roll-out of a large-scale training programme for the approx. 200 employees at the plant.

Concurrent with these activities, the division carried out several price increases in 2004 and announced at year-end that new price increases are scheduled for 2005.

The division posted a negative EBIT contribution of DKK 162 million in 2004 including the write-down of the entire amount in activated goodwill, DKK 56 million, and with this adjustment the operating result is negative with DKK 106 million against DKK -50 million in 2003.


11

Operating result in 1Q and 2Q showed a loss of DKK 34 million and DKK 35 million, respectively. For 3Q the loss was reduced to DKK 21 million and was in 4Q further reduced to DKK 17 million, excluding the goodwill write-down. The goodwill write-down is mainly the result of developments in the USD/CAD rate, which has declined by approx. 25% since the de-cision to invest in the new production plant. This de-velopment in exchange rates has an adverse effect on earnings in North America, and the activated goodwill is therefore written down.

Even if the loss in Q4 has been more than halved com-pared to the level for 1Q and 2Q, there is still a long way to go to achieve a satisfactory result.

The division is currently working on several initiatives to compensate for the unfavourable development in ex-change rates. The assessment of the goodwill write-down does not take account of the effect of such initiatives.

Egg & Fruit Packaging South AmericaThe Group’s division in South America accounts for 8% of consolidated revenue, and it posted DKK 130 million in revenue in 2004, up approx. 5% from last year (DKK 124 million). The increase reflects primarily higher ave-rage selling prices compared with 2003.

Developments in operating costs were satisfactory in 2004. The division continued its strict cost management strategy and also benefited from a decline in the price of recycled paper. In 2004, for the second consecutive year, the activities in South America achieved strong profit growth, posting a positive EBIT contribution of DKK 2 million, up from DKK -11 million in 2003, and a profit margin of 1%, up from -9% in 2003.

With these achievements, Egg & Fruit Packaging South America passed a crucial milestone in the turnaround process that was launched in 2002.

Industrial PackagingHartmann’s Industrial Packaging division contributes 12% of consolidated revenue, and last year’s positive development continued in 2004 when revenue advanced to DKK 191 million, up DKK 34 million or 21%. The Group thus achieved the planned strengthening of its position in the international market as a supplier of packaging to major industrial enterprises.

The European activities were supported by strong growth in the market for mobile phones and the addition of sev-eral new strategic customers. The positive developments were also driven by contributions from the markets in Asia, where the business trends have generally improved and the division won several new customers and projects such as Apple Computer (the iPod products) and Sony (digital cameras). On the other hand, sales of industrial packaging in North America remained flat.

Customers of industrial packaging products are demanding increasingly advanced solutions both in relation to design and manufacturing process. This caused an increase in production costs, and this again lowered the margin per unit produced. The division continued strengthening its design and innovation com-petencies in 2004. The sizeable volume growth achieved by the division resulted in an EBIT contribution of DKK 38 million in 2004, up 34% from the year before (DKK 28 million). Profit margin stood at 20% in 2004, up from 18% in 2003.

The combined heat and power plant (CHP plant)Hartmann has previously announced that it had plans of divesting the CHP plant in Tønder, however on the precondition that a long-term supply contract with the local district heating utility could be signed. It has not yet been possible to achieve such a contract and the plans of divestment have therefore been abandoned.

A decision by the Danish Energy Board of Appeal gave in principle the municipality of Tønder a possibility for the construction by the local district heating utility of a biomass-fired heating plant capable of providing full or partial replacement of the district heating delivered by Hartmann. On 24 January 2005, Hartmann filed a law-suit against the Energy Board of Appeal, claiming that the dispensation was granted on the wrong grounds. The lawsuit was filed with the Danish High Court, Eastern Division and the Energy Board of Appeal has later reopened the case.

The CHP plant posted revenue of DKK 50 million in 2004, unchanged from the year-earlier level of DKK 49 million, and an operating profit of DKK 7 million, up DKK 2 million from 2003 (DKK 5 million).


12

Skjern Papirfabrik A/SSkjern Papirfabrik A/S posted revenue of DKK 125 mil-lion and an operating result of DKK 6 million, both of which were unchanged from the year-earlier level. Hart-mann believes that, in the long term, the company would do better with a different owner, and as part of the Focus Plan it has now been put up for sale. The final sale will be closed only if the solution is deemed satisfactory.

Food PackagingThe Group’s food packaging activities (dualpack) returned revenue of DKK 12 million in 2004. The business area was closed down in the autumn as provided for in the Focus Plan, and on that occasion approx. 25 jobs were cut. The closure, which also involved the depreciation of a number of long-term assets, comprised a total of DKK 26 million in restructuring costs and depreciation. Of this amount, DKK 3 million had a liquidity effect.

Developments in revenue Total consolidated revenue increased in 2004 to DKK 1,642 million, up 8% from the year-earlier level of DKK 1,525 million. This reflects an average annual growth rate of approx. 5% in the five-year period 2000–2004.

Compared to last year, revenue was positively affected by the full-year effect of the revenue contribution from the US market. Overall, North America contributed revenue growth of DKK 38 million from the year-ear-lier level to DKK 144 million. Furthermore, most of the Group’s business areas returned revenue growth, among

them Egg & Fruit Packaging Europe (6%) and Industrial Packaging (21%).

The main drivers of organic growth were higher volumes and changes in the product sales mix. However, this was partially offset by approx. DKK 18 million in adverse ef-fect from exchange rate fluctuations.

Developments in result The Group posted an operating result that was negative in an amount of DKK 118 million. Egg & Fruit Pack-aging North America made a negative contribution of DKK 162 million (incl. DKK 56 million in write-down of goodwill), whereas other business activities made a positive contribution of DKK 94 million. The amount in operating result was adversely affected by DKK 50 million in one-off costs from the implementation of the Focus Plan.

The Group posted DKK 29 million in financing expenses, net – unchanged from the year-earlier level but below expectations due to a limited net effect of exchange rate fluctuations.

Tax on profit/loss for the year constituted an income item of DKK 25 million, primarily attributable to cur-rent tax (net) of DKK 22 million and a positive change in deferred tax corresponding to DKK 47 million. Tax income for the year reflects an effective tax rate of 17% against 33% in 2003.


DKKm 2004 2003

Revenue Operating result Revenue Operating result

Egg & Fruit Packaging Europe 940 94 888 89

Egg & Fruit Packaging North America 144 -106 106 -50

Egg & Fruit Packaging South America 130 2 124 -11

Industrial Packaging 191 38 158 28

Skjern Papirfabrik A/S 125 6 125 7

CHP Plant 50 7 49 5

Others 61 -53 75 -40

Total excl. one-off cost items 1,642 -12 1,525 29

Goodwill re North America -56 -

Restructuring (Focus Plan ) -50 -

Operating result (EBIT) after one-off cost items -118 29

Operating result (EBIT) excl. restructuring and North America 94 79

Revenue and operating result (EBIT) by division

13


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This gave a result after tax that was negative in an amount of DKK 122 million against a positive amount of DKK 1 million in 2003.

CostsThe Group’s costs of distribution, sales and administra-tion increased from DKK 379 million in 2003 to DKK 406 million, or 7%. Rated to revenue these costs account for 25% which is unchanged from the year-earlier level.

EmployeesThe average number of employees in the Group in-creased to 2,593 in 2004, up 230 of whom 207 employ-ees are attributable to the activities in North America. This is explained by the fact that in 2003, the employees at the new plant in Canada contributed to the average for approx. six months only. The rest of the Group had an average increase in the number of employees of 23 persons (1%).

The staff reduction resulting from the Focus Plan will not have full effect until in early 2005.

Financial controlThe Group’s interest-bearing debt, net came to DKK 491 million at 31 December 2004, up from DKK 458 million

at 31 December 2003. The increase of DKK 33 million is because of the negative net result of DKK 122 million for the year.

In 2004 Hartmann increased its financial reserves by taking up loans totalling DKK 55 million net. The re-sources were used to reduce the Group’s short-term credit facilities and also increased the foreign exchange cover of the net investments in Canada in an amount of approx. DKK 40 million.

At 31 December 2004, the Group’s financial reserves totalled approx. DKK 213 million, up DKK 26 million from 31 December 2003 (approx. DKK 187 million).

Group interest-bearing debt, net corresponds to 85% of capital and reserves, and this reflects an increase of the Group’s financial gearing in 2004 from the level of 66% in 2003, attributable mainly to a reduction in ca-pital and reserves because of the result for the year incl. goodwill write-down and restructuring costs and write-downs related to the Focus Plan. The increase in gearing is thus to a lesser degree attributable to the in-crease in interest-bearing debt, net of DKK 33 million.

14

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Working capital and invested capital At year-end 2004, the Group’s balance totalled DKK 1,504 million, reflecting a decline of DKK 89 million from year-end 2003. The main reason for this decline was a re-duction in invested capital caused by the goodwill write-down re North America and the write-downs related to the Focus Plan. Total tangible assets came to DKK 927 million at 31 December 2004 against DKK 961 million at 31 December 2003.

Also, the amount in working capital dropped DKK 48 million, from DKK 172 million at 31 December 2003 to DKK 124 million at 31 December 2004, mainly as a result of a rise in the number of creditors and other short-term obligations. Inventories and trade receivables remained unchanged despite the growth in revenue of 8%. Cash flows, investments and rate of returnCash flows from operating activities stood at DKK 74 million in 2004, down from DKK 100 million last year. The decline of DKK 26 million should be considered against the background of the decline in result for the year of DKK 123 million. The decline was restricted to DKK 26 million partly because the result for the year includes one-off cost items with no liquidity effect (approx. DKK 96 million), partly because the operating

capital dropped DKK 33 million from the level at 31 December 2003.

The improvement in operating capital reflects the in-creased number of creditors combined with an unchang-ed amount in capital tied up in trade receivables and inventories. Developments in Group operating capital and, hence, Group working capital are satisfactory and were achieved by means of increased management focus.

Cash flow from investment activities totalled DKK -107 million (hereof North America DKK -11 million) reflecting a decline of DKK 94 million from the level in 2003 (DKK -201 million), although the 2003 figure included approx. DKK 133 million in investments in North America.

Group investments for the year account for 96% of the period’s depreciation of property, plant and equipment which totalled DKK 115 million.

Hartmann has no plans of major increases in capacity in the short term and therefore considers its investment level as having returned to normal.

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15


Cash flows from operating and investment activities to-talled DKK -32 million in 2004 against DKK -101 million in 2003, reflecting a positive change of DKK 69 million.

Adjusted for the North America effect, cash flows from operating and investment activities totalled DKK 61 mil-lion against DKK 103 million in 2003. This reflects a de-cline of DKK 42 million of which approx. DKK 10 million is attributable to the Focus Plan and DKK 20 million relates to a higher investment level in the Group outside North America.

After the raising of DKK 55 million in loans, total cash flows stood at DKK 23 million in 2004 compared to DKK -26 million in 2003.

Because of the loss posted by the Group, return on equity for 2004 was negative in an amount of 19.2% against 0.1% in 2003. ROIC (return on invested capital) came to -10.6% against 2.6% in 2003. Invested capital totalled DKK 1,060 million at 31 December 2004 against DKK 1,162 million at 31 December 2003, reflecting a decline of DKK 102 million of which DKK 56 million is attributable to the write-down of goodwill relating to North America.

Return on invested capital (ROIC) adjusted for re-structuring and North America, came to 11.3% in 2004 against 8.5% in 2003.

Movements in capital and reserves,earnings per share and dividendGroup capital and reserves declined in 2004 from DKK 696 million to DKK 580 million. This reflects the re-sult for the year of DKK -122 million, negative foreign exchange adjustments of investments in subsidiaries of DKK 3 million, and a negative effect of DKK 13 million net from the fair value of the Group’s financial hedging instruments for foreign exchange. Capital and reserves were affected positively in an amount of DKK 23 million resulting from the change in fair value of investments in Cemosa and Duales System Deutschland, both of which are expected to be divested in 1Q 2005.

Earnings per share (EPS) was negative in an amount of DKK 35.9 against DKK 0.2 in 2003. The Board of Direc-tors recommends to the Annual General Meeting that no dividend be declared for 2004. It is still the Group’s dividend policy to maintain a pay-out ratio of 30%, and accordingly the recommendation builds exclusively upon the unsatisfactory result for the year.

16

MarketThe total European market for retail egg packaging represents a value of around DKK 2 billion per year and has an estimated annual growth rate of approx. 2%. The higher growth rates are in the markets in Cen-tral and Eastern Europe where modern-style re-tailing is rapidly gaining ground, whereas growth rates are lower in the rest of Europe. Moulded- fibre packaging accounts for about 75% of the total market, and it is used primarily in Northwestern Europe. Southern Europe prefers packaging in other materials such as plastic.

Besides strong growth in Eastern Europe the market is characterised by a rising demand in several specialty segments. Examples are the high-end segment (organic

eggs, free-range eggs and other specialty products) and the low-end segment (cheaper priced eggs) both of which have seen growth in recent years. At the same time the egg packaging market feels a general pressure on prices, and this puts considerable demands on manufacturers of packaging who are expected to deliver an increasing level of added value to customers in the form of specialised solutions at competitive prices.

Hartmann is market leader in Europe in relation to retail egg packaging, and the Group holds a strong position both in Northwestern Europe and in the high-growth markets in Eastern Europe. Its main strength as a sup-plier to the market in Europe derives from its wide prod-uct program, its sustainable profile and its longstanding tradition for innovation and customer service.

ChallengesWith revenue growth of 6% and an increase in EBIT contribution of 5%, Hartmann’s European activities de-veloped as planned in 2004. However, the Group believes that it is possible to grow operational profitability even further, partly by means of increased sales of premium products such as imagic and Superface, partly by further improvements in production and work processes.

Against this backdrop, the main focus areas for Egg & Fruit Packaging Europe in 2005 will be the completion of the new organisational restructuring which, once implemented, will improve efficiency in purchasing, logistics and other joint functions, while also ensuring re-alisation of the cost savings contained in the Focus Plan.

EGG & FRUIT PACKAGING EUROPEHartmann’s European egg and fruit packaging activities contribute 57% of consolidated reve-nue. This makes Egg & Fruit Packaging Europe the biggest division in the Group.

Management: Per V. Frederiksen, Executive Director

FACTS ABOUT THE DIVISIONS

2004 2003 2002 2001 2000

Revenue (DKKm) 940 888 901 891 784

Contribution to consolidated revenue (%) 57 58 64 63 58

Operating result (DKKm) 94 89 110 119 66

Operating margin (%) 10 10 12 13 8

17


Management: Ash Sahi, President

MarketThe market for egg packaging in North America ge-nerates revenue at a level similar to the market in Europe (DKK 2 billion). The market is estimated to grow between 1 and 2% per year, and up until now it has been dominated by standard packaging products in both moulded fibre and plastic. These two materials each accounts for some 50% of the market as opposed to Europe, where moulded fibre accounts for approx. 75%. Hartmann has captured approx. 8% of the total market for egg packaging.

Prices in the North American market have been rela-tively low as in the past there has been far less focus on the quality of packaging and product development than in Europe. However, Hartmann believes that this difference will gradually disappear as the interest among US customers in higher quality and more advanced types of packaging is rising. This trend represents one of Hartmann’s most significant growth opportunities in the long term.

The North American market is also characterised by a tendency towards consolidation among egg producers. Hartmann expects this tendency to result in considerable demands to the product programs and customer services offered by manufacturers of packaging in the years ahead.

Consumer interest in niche products such as free-range eggs and omega-3 eggs is increasing rapidly, and this is expected to pave the way for innovative specialised packaging solutions that can be integrated into market-ing activities because of their design, dyeing, labelling and

high-quality print. This is an area in which Hartmann is strongly positioned thanks to its experience in product development to customers in Europe.

ChallengesHartmann’s revenue in North America in 2004 increased 36% which, however, was primarily attributable to the full-year effect of the establishment of the new produc-tion facility in Canada in the summer of 2003. Major running-in difficulties at the plant resulted in a consider-able loss on operations in North America also in 2004, and the loss was further affected by write-down of goodwill. However, the company succeeded in growing productivity and at the same time reducing operating costs during the year by initiatives such as staff reductions and a renegotiation of supplier and service contracts.

Hartmann’s biggest challenge in North America will be to raise production capacity levels, reduce di-rect cost of labour and ensure profitable operations. A number of measures will be taken to secure the necessary progress, and here the outcome of the ongoing negotiations with the trade union plays a crucial role. Concurrent with these efforts the Group will strengthen its market position by means of new products and improved service.

EGG & FRUIT PACKAGING NORTH AMERICASince the summer of 2003, Hartmann’s result has been severely affected by major operating problems at the new production plant in Canada. Operations improved in 2004 but are still not developing satisfactorily. North America contributes 9% of consolidated revenue.

2004 2003 2002 2001 2000

Revenue (DKKm) 144 106 36 - -

Contribution to consolidated revenue (%) 9 7 3 - -

Operating result (DKKm) -162*) -50 -7 - -

Operating margin (%) -112 -47 -19 - -

*) Includes goodwill write-down of DKKm 56

18

Market

Hartmann’s production in South America includes egg packaging as well as packaging for fruit such as e.g. apples, pears and melons. The market for egg and fruit packaging in the southern part of South America represents an annual value in the range of approx. DKK 400 million. In terms of volume the market is developing on the basis of an underlying growth of about 3% per year. Hartmann has captured around one third of the market, which makes it the largest supplier.

In addition to the major and well-established manu-facturers of packaging, the market is serviced by a large number of small, local manufacturers who produce

for their own consumption and for local customers. This fragmented supplier structure puts severe pres-sure on prices. However, Hartmann has succeeded in raising sales prices over the past couple of years and is now price leader in the market. A customer survey from 2004 confirms that compared to the competitors, Hartmann’s prices are higher, but at the same time the Group is recognised as leader in terms of quality and product program.

The market in South America serviced by Hartmann felt the pressure in 2004 from an array of standard prod-ucts in moulded fibre as well as an increasing supply of packaging in other materials, both of which resulted in fierce competition on prices.

ChallengesHaving achieved revenue growth of 5% for the second year in a row, Hartmann in South America succeeded in making a small, positive contribution of DKK 2 mil-lion to the consolidated result in 2004, up from a ne-gative result of DKK 11 million. This made the year an important milestone in the turnaround process that was launched in 2002.

This process will continue over the next couple of years driven by tight cost control and additional im-provements in efficiency. The division will respond to competition from other manufacturers of packaging by pursuing a professional market cultivation strategy with intensified focus on the Group’s strengths in relation to quality, product program and service.

EGG & FRUIT PACKAGING SOUTH AMERICAHartmann’s activities in South America account for 8% of consolidated revenue. In 2004, for the second consecutive year, they generated considerable progress enabling the company to make a small, positive contribution to the Group’s result, and this marked an important milestone in the turnaround process.

Management: Fernando Silveira Filho, President

2004 2003 2002 2001 2000

Revenue (DKKm) 130 124 149 228 241


Operating result (DKKm) 2 -11 -20 15 19

Operating margin (%) 1 -9 -13 7 8


19

INDUSTRIAL PACKAGINGAchieving revenue growth of 21% in 2004, Industrial Packaging is the fastest growing core business area in the Group. Sales of packaging for industrially manufactured products contribute 12% of consolidated revenue.

MarketThe Group’s division for industrial packaging provid-es packaging solutions for a large and highly diverse group of products among which are mobile phones and other types of consumer electronics, IT equipment and pharmaceutical products. The diversity reflects the market potential, which is huge – far bigger than the market currently using packaging solutions in moul-ded fibre. Hartmann estimates that, in the long term, products currently being packaged in plastic or folded cardboard will hold a considerable growth potential for the Group – mainly driven by the growing interest in the environmentally-friendly properties contained in moulded-fibre packaging.

Hartmann is the leading supplier of industrial packaging in moulded fibre in Europe, but because of the Group’s market presence also in Asia, North America and South America it is capable of offering globally standardised packaging solutions to the biggest international manu-facturers of consumer electronics.

The global market for moulded-fibre packaging for in-dustrial products felt the impact of the business cycle upturn in 2004. While the US market remained flat, the markets in Asia and Europe were driven by an in-crease in the demand for consumer electronic products such as mobile phones, digital cameras and MP3 players. However, Hartmann also experienced a stronger pres-sure on prices as industrial customers relocated their production activities to the Far East.

Challenges

Industrial Packaging has achieved significant growth in recent years and is generating profitability at a fine level. Growth drivers are an expanding scope of business activities with existing customers and an influx of new customers. However, customers are demanding increasingly complex types of packaging, and this is re-flected in the division’s cost level.

Against this backdrop, it is an important task for the divi-sion to carry out improvements of its processes enabling it to raise the speed of its development of new product types without compromising profitability. It also needs to raise production efficiency, e.g. by introducing more advanced and automated production technology.

2004 2003 2002 2001 2000

Revenue (DKKm) 191 158 127 100 114


Operating result (DKKm) 38 28 21 -1 8

Operating margin (%) 20 18 17 -1 7

Management: Steen Ulrik Madsen, Executive Director


20

DKKm Group excl.

North America North America

Group incl.

North America

Operating result (EBIT) 2004 44 -162 -118

Restructuring costs and write-downs re Focus Plan 50 - 50

Write-down of goodwill re North America - 56 56

Adjusted operating result 2004 94 -106 -12

Expected change in earnings 2005 - - approx. 62

Expected operating result (EBIT) 2005 - - approx. 50

Development in operating result 2004-2005

AssumptionsThe outlook for 2005 builds upon the existing mix of business activities in the Hartmann Group adjusted for the closure of the food packaging production.

Skjern Papirfabrik A/S is included in the outlook with full-year effect for 2005 as the date for a possible sale is unknown.

The outlook also builds upon the foreign exchange rates listed at the opening of FY 2005, and it is assumed that prices of energy and raw materials remain flat. It is further assumed that prices of standard packaging in Egg & Fruit Packaging Europe remain at the level pre-vailing in early 2005.

Discrepancies between the above assumptions and the actual development in exchange rates, prices of energy, raw materials and packaging may significantly affect the result for the year.

RevenueHartmann expects revenue to remain flat in 2005 at a level of approx. DKK 1,600-1,650 million. This figure reflects a small organic growth in the Group’s four core business areas, but this is likely to be offset by a decline in revenue in Hartmann Technology, and by the closure of the food packaging production.

The main drivers of organic growth are expected to be Egg & Fruit Packaging Europe, while North and South America and Industrial Packaging are expected to achieve revenue at the 2004 level. A very high sales figure 4Q 2004 in Industrial Packaging is due to an extraordinarily great stock accumulation with the customers so a weak 1Q 2005 is expected. Hartmann expects Hartmann Technology, which received large external orders for machinery also in 2004, to post a decline in revenue of DKK 20 million in 2005.

Group revenue is generally expected to be divided equally on the four quarters, however with the usual increases in revenue levels in 1Q and 4Q over the levels in 2Q and 3Q.

Operating result (EBIT)The Group is expected to post a consolidated operat-ing result in 2005 of approx. DKK 50 million. This growth will a.o. be driven by factors such as ap-prox. DKK 20 million in positive impact of measures under the Focus Plan in Egg & Fruit Packaging Europe. However, this effect will be partially offset by higher energy costs and higher shipping costs after the intro-duction of a new road tax in Germany.

OUTLOOK 2005The consolidated operating result in 2005 is expected to be approx. DKK 50 million which includes approx. halving the loss in North America, adjusted for goodwill write-down.

OUTLOOK 2005

21

Egg & Fruit Packaging South America is still expected to improve its result, while earnings in Industrial Pack-aging are forecast to remain flat in 2005.

Hartmann Technology is expected to reduce earnings in 2005 due to a normalisation of activity levels.

The North American division expects to approximately halve the 2004 loss, adjusted for goodwill write-down (DKK 106 million).

The actual earnings improvement in North America is, however, about DKK 15 million higher, as Hartmann succeeded in arranging hedging of USD/CAD in 2004 at a much more favourable rate than the one achieved for 2005.

The size of the loss in North America depends partly upon the speed with which the new plant in Canada achieves a more satisfactory production level, partly upon the outcome of the renegotiation of the existing union agreement.

Hartmann expects the activities in North America to generate a negative operating result of approx. DKK 20 million in 1Q 2005. For the Group as a whole the forecast includes a positive operating profit in 1Q 2005 of approx. DKK 10 million.

For 4Q 2005 consolidated operating result is expected to be considerably higher than in 2Q and 3Q because of the season and a continuous improvement in North America.

Group resultInterest expense, net for the Group in 2005 is forecast at up to DKK 40 million, and this is higher than the level achieved in 2004 due to an increase in the average interest-bearing debt, net and a possible negative effect of foreign exchange rates.

In 1Q 2005 Hartmann will sell its entire shareholding of 18.4% in Celulosas Moldeadas Hartmann, S.A. (Ce-mosa), and this will have a positive effect of approx. DKK 20 million on the Group result.

Group result after tax and minorities is thus expected to be positive in an amount of approx. DKK 25 million.

A positive development is forecast for the Group’s cash position, and there are no prospects of an increase in the Group’s interest-bearing debt, net.

OUTLOOK 2005

22

The Focus Plan was launched in the autumn of 2004 upon the completion of a mid-term evaluation of Hartmann’s five-year strategy plan from 2002. The strategy for the three product areas which existed at the time – egg and fruit packaging, industrial pack-aging and food packaging – focused on a strengthening of these three product areas at global level by means of organic growth and strategic acquisitions. The plan stipulated the following financial targets for fulfilment by 2006: Consolidated revenue of minimum DKK 2 billion, a profit after tax of minimum DKK 100 million and a return on invested capital (ROIC) of minimum 12%.

The mid-term evaluation of the five-year strategy plan made it clear that it would not be possible to achieve fulfilment of the original financial targets by 2006. This is primarily due to the establishment in North America and the related running-in problems which have had a ma-jor adverse effect on the Group’s result .

The main elements of the mid-term evaluation appear in the chart below.

STRATEGY AND TARGETS

Strategic objectives in plan 2002-2006 Status year-end 2004

• Secure a position as absolute market leader in

Europe within egg and fruit packaging

Hartmann is the absolute market leader in Europe and its business development

is stable. The Group believes that the business area still holds a potential for

both further growth and further profitability.

• Establish an important position in North America With an acquisition in 2002, Hartmann acquired a sizeable market share and a

future growth opportunity in North America and later added a new production

plant. Due to major running-in difficulties, the business area has made consider-

able losses, but it is deemed to hold a long-term business potential.

• Secure a position as absolute market leader in

South America within egg and fruit packaging

Hartmann is the absolute market leader in South America, but activities were

loss-making in 2002 and 2003. However, the business has made progress and

posted a small, positive result in 2004. The Group believes that the area will

produce steadily improving results in future.

• Consolidate industrial packaging as a strategic

business area

In recent years, the Group’s activities in Industrial Packaging have shown strong

growth and generated satisfactory profitability.

• Develop food packaging as a strategic business area The actual production of food packaging began in 2002. The results failed to

meet expectations and the business area was closed down in 2004.

Financial targets

• Revenue > DKK 2,000 million

• Profit after tax > DKK 100 million

• ROIC > 12%

In view of the situation in North America in particular it is considered unlikely

that the Group will meet its financial targets by the expiry of the strategy period

at year-end 2006.

Mid-term evaluation of strategy 2002-2006

The expensive start-up in North America has made it unrealistic for the Group to fulfil the original financial targets by 2006. Therefore the strategy and the financial targets have been reevaluated in connection with the Focus Plan.


A mid-term evaluation of the Group strategy

STRATEGI OG MÅL

23

Adjusting targets and strategy 2005-2007

Based on the outcome of the mid-term evaluation Hartmann made the decision to adjust targets and ex-tend the strategy period until 2007.

The mid-term evaluation led to the launch in the autumn of 2004 of the Focus Plan, which involves two adjustments to Hartmann’s strategy: The closure of food packaging production and the start-up of the divestment of Skjern Papirfabrik A/S. Concurrent with the launch of the Focus Plan, the Group initiated a reorganisation of its activities in Europe in an effort to improve profitability by measures such as major cost savings.

It is the objective of the Focus Plan to consolidate and further strengthen the development of Hartmann’s financially viable business activities by intensified focus on the Group’s core business areas. Accordingly, Hartmann’s strategic work in coming years will be concentrated on efforts to continue and strengthen the fine position, growth and earnings achieved by Egg & Fruit Packaging Europe and Industrial Packaging. Concurrent with these efforts the Group will focus

on maintaining the positive development in Egg & Fruit Packaging South America so as to make this business area contribute to consolidated earnings.

Lastly, the Group intends to turn around the strate-gically important investment in Egg & Fruit Packaging North America so as to make it a profitable operation. It is a decisive prerequisite to achieve an ongoing and sizeable reduction in the division’s loss already in 2005 and, subsequently, to develop the business into a profit-making entity so as to preserve this important growth opportunity for the Group. However, the Group does not expect the activities in North America to produce an attractive rate of return until after the expiry of the strategy period in 2007. A prerequisite to reach the Group’s target is, however, that the division has turned the loss into a moderate profit at the latest in 2007.

Assuming that North America will complete the above process successfully, Hartmann has stipulated the following financial targets for 2007:

Target 2007 Actual 2004

Revenue >DKK 1,600 million DKK 1,642 million

Operating result (EBIT) minimum DKK 120 million DKK -12 million*)

Consolidated result after tax (EAT) minimum DKK 60 million DKK -27 million**)

Return on invested capital (ROIC) >10% -11%

*) EBIT in 2004 is stated before one-off cost items totalling DKK 106 million **) EAT in 2004 is stated before one-off cost items totalling DKK 96 million

Targets 2007

24

STRATEGI OG MÅL

25

Revenue

The revenue target for 2007 builds upon a moderate organic growth in the Group’s four core business areas. If the core business areas achieve this growth by 2007, that in itself will be sufficient to compensate for the reve-nue decline resulting from the closure of food packaging and the expected divestment of Skjern Papirfabrik A/S. This is why the adjusted revenue target corresponds to the revenue level actually achieved in 2004.

Operating resultThere have not previously been any public announce-ments of Hartmann’s long-term target relating to ope-rating result (EBIT). The target of minimum DKK 120 million in 2007 requires a continued profit progress in the core business areas excl. North America. Further-more, it is a prerequisite that the loss in North America is turned into a moderate profit by 2007 at the latest.

Consolidated resultThe target for the Group’s consolidated result after tax has been lowered to minimum DKK 60 million from the previous level of DKK 100 million, primarily to re-flect the lowered expectations to consolidated result in North America in the strategy period 2005-2007.

Return on invested capital (ROIC)The ROIC target is now fixed at 10% (2 pp below the previous target). The level ensures that earnings after interest and tax are attractive and creative from a share-holder value point of view. The rate of return is thus expected to be higher than the Group’s WACC (the average capital cost).

Strategic focus areas 2005-2007The future development of the Group’s business activi-ties will be concentrated primarily on consolidation of the Hartmann Group and will primarily focus on the fol-lowing three focus areas:

• To fulfil the defined ROIC target, the Group must make a sustained effort to improve the efficiency of work and production processes throughout the Group including North America. Accordingly, Hartmann will intensify its efforts in this area over the next three years.

• To fulfil its plans of organic growth, the Group must necessarily maintain its position as the most inno-vative supplier of moulded-fibre packaging and re-lated services for egg, fruit and industrial packaging. Accordingly, the Group will intensify its efforts to develop new types of products and value-adding ser-vices targeted towards well-defined market segments.

• The Group will enhance its achievements in industrial packaging by spreading its production, sales and con-sultancy activities to the markets in North and South America and Asia.

Concurrent with these efforts, Hartmann will con-tinue its development efforts in relation to the Group’s management processes, employee development and communication.

The above efforts should ensure a steady consolidation of Hartmann and furthermore entail that the Group will be solidly positioned for further growth.


26

Risk management

Hartmann’s business activities involve a number of ope-rational, financial, environmental and social risks. It is a fundamental objective for the Group Management to make sure that there is constant and adequate monitor-ing of the Group’s risk exposure, and that the necessary policies and procedures are in place to ensure the per-formance of risk management. Below is an outline of the most important risk factors in the Hartmann Group.

Operational risksPurchasing pricesRecycled paper and energy constitute the most impor-tant raw materials in Hartmann’s production, and they each account for some 10% of consolidated revenue.

The Group has limited its exposure to developments in paper prices in Europe to a certain extent by signing price equalisation agreements with its most important suppliers of paper in Europe. Because of these agree-ments, the effect on Hartmann’s purchasing prices of developments in the market price of recycled paper happens at a certain delay. This improves the Group’s chances of adjusting its pricing strategy and the volume of its packaging production in reflection of developments in paper prices.

Hartmann has made arrangements to reduce its expo-sure to fluctuations in energy prices in 2005 by signing fixed-price contracts with suppliers of energy in those countries where this is possible.

Market risksIf Hartmann’s egg packaging activities are to develop in keeping with expectations, the following requirements have to be met: • Moulded-fibre packaging must maintain its competitive

advantage over competing types of packaging in other materials

• There must be no systematic favourisation of com-peting types of packaging in other materials through national or regional tax regimes

• There must be no long-lasting reduction in the de-mand for eggs due to outbreaks of a regional epidemic poultry disease

Hartmann endeavours to minimise the price sensitivity of its entire product program by offering a wide range of packaging solutions and by strategic marketing initiatives which enable the Group’s customers, including food chains and egg producers, to differentiate their product and, thus, increase sales and the value of the market.

Financial risksBecause of its international activities, Hartmann’s result and capital and reserves are exposed to an array of finan-cial risks, among them currency risks, interest rate risks, liquidity risks and credit risks. It is Hartmann’s general policy to stay constantly updated on its financial risk ex-posure and to establish policies and procedures which reduce it to a minimum.

Hartmann hedges commercial exposure only and conse-quently does not enter into speculative positions. Faced with the choice between several possible types of deriva-tive financial instruments, the criterion of simplicity will be used.

Hartmann has centralised the management of financial risks in the function Corporate Treasury which also acts as service centre for all subsidiaries in the Group.

Currency risksIn its currency policy the Group strives to reduce the impact of exchange rate fluctuations on its result and financial position. Hartmann’s currency risks stem from an imbalance between income and outgoings in the individual currencies and from the net assets held by the Group in companies located outside Denmark.

RISK MANAGEMENTIt is a fundamental objective for the Group Management that there is constant and adequate monitoring of the Group’s risk exposure, and that the necessary policies and procedures are in place to ensure the performance of risk management.

RISK MANAGEMENT

27

It follows from Hartmann’s financial policy that for-ward cover of future transactions, e.g future sales and purchases, is arranged exclusively by means of finan-cial instruments with a term to maturity of up to 15 months. Gains and losses are recognised in the income statement upon the realisation of the transactions for which cover was arranged.

Hartmann’s biggest currency exposure in relation to operating result relates to euro (EUR), American dollar (USD) and pound sterling (GBP). Hartmann also con-siders the Polish zloty (PLN) to be an important cur-rency for which the exposure stems from the cross rates between PLN/DKK and PLN/HUF. Hartmann’s sales to the USA in USD are handled through the subsi-diary in Canada. This involves exposure to the cross rate USD/CAD and constitutes the largest currency risk for the Group.

All other things being equal, a fluctuation of +/- 2.25% in EUR will affect the Group’s operating result in an amount of approx. +/- DKK 11 million, whereas the effect of a fluctuation of +/- 5% of USD against CAD will amount to approx. +/- DKK 6 million.

The most important currencies for which Hartmann had arranged forward exchange contracts at 31 December 2004 to cover the Group’s currency risks were:

Hedging is arranged of the currency risks relating to in-vestments in foreign subsidiaries when this is deemed appropriate. This particular currency risk is managed primarily by means of foreign currency loans. In relation to the investment in Canada, cover had been arranged of approx. 75% of the net exposure at 31 December 2004 by means of loans in CAD.

Interest risksHartmann’s income statement and balance are affected by fluctuations in interest rates. The main risk exists in rela-tion to interest-bearing debt items, as the Group had no significant interest-bearing assets at 31 December 2004.

It is Group policy to use the management of interest risks to mitigate the negative effects of interest rate fluc-tuations on earnings and balance. Financing is primarily arranged in the form of fixed-rate long-term loans either in DKK, EUR or CAD.

Changes in interest rate levels are not believed to have any significant effect on the result before tax, and the Group’s interest rate exposure over the next 1-5 years is therefore considered to be modest.

However, the net present value of interest-bearing debt will change considerably in the event of changes in in-terest rates. At 31 December 2004, 81% of interest- bearing debt was accounted for by loans with a long term to maturity. The net present value at 31 December 2004 was DKK 24 million higher than the value with which the debt is recognised in the accounts. The dif-ference is explained by the average interest rate on interest-bearing debt being higher than the actual interest level.

Liquidity risksIt is the responsibility of Corporate Treasury to arrange for sufficient and flexible liquidity reserves for the financing of Hartmann’s current operations including the risk of refinancing.

(’000) Contractual value Unrealised value adjustment

31 Dec. 2004 31 Dec. 2003 31 Dec. 2004 31 Dec. 2003

CAD/EUR 16,000 16,000 3,090 2,739

USD/CAD 16,800 18,000 1,267 9,878

GBP/DKK 1,800 3,240 543 401

PLN/DKK 10,800 - (361) -

PLN/HUF 15,600 - (515) -

Covered currencies 2005

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Revenue segmentation by currency

RISK MANAGEMENT

28

Group financing is arranged primarily by fixed-rate long-term loans in one of the Group’s main currencies (DKK, EUR or CAD). Financing for Group subsidiaries is arranged either through Corporate Treasury or, where required by local circumstances, through one of the Group’s main banks, however upon agreement with Corporate Treasury.

Group cash reserves consist of bank deposits and credit facilities in the form of committed facilities and uncom-mitted facilities arranged with major banks.

The Group’s interest-bearing debt, net at 31 December 2004 came to DKK 491 million against DKK 458 million the year before. Cash reserves totalled DKK 213 million against DKK 187 million the year before. Group gearing at 31 December 2004 stood at 85% compared to 66% at year-end 2003. The Group’s liquidity risk is conside-red as being low.

The Group’s short-term liquidity is managed mainly through cash pools where business entity liquidity is transferred to Corporate Treasury which also arranges for the equalisation of drawings on liquidity in entities requiring cash. Credit risksHartmann has no significant concentration of credit risks. The Group handles credit risks by dealing in finan-cial instruments only and by depositing cash resources with banks with a satisfactory credit rating from one or more credit rating agencies in pursuance of the Group’s financial policy.

The distribution of the Group’s trade receivables is such that Hartmann’s credit risks are not considered

as being out of the ordinary. As a main rule, all trade receivables are covered by insurance if possible and deemed appropriate. The main rule is only waived for customers with a very high credit rating.

The Group’s trade receivables at 31 December 2004 totalled DKK 263 million net, and of this amount 47 % was covered by insurance (2003: 41%). At 31 Decem-ber 2004 provisions for loss on bad debts were stated at DKK 14 million against DKK 9 million at 31 Decem-ber 2003.

Environmental risksThe Group’s exposure to environmental risks is monitor-ed both at local level and by the environmental function at corporate level. Hartmann’s environment manage-ment model, STEP®Environment, is implemented at all production plants in the Group, and with this model it is possible to act efficiently and professionally to prevent, remedy or reduce to a minimum any cases of strain to the external environment.

Life-cycle assessments of Hartmann’s activities and products show that the most important impact on the external environment comes from the consumption of energy in the production process. Accordingly, a reduction of this consumption has high priority. An ongoing reduction in energy consumption is achieved through the development and implementation of more energy-efficient technologies and improved energy management.

Major environmental risks may occur in connection with the acquisition of companies due to environment-al impairment or commitments arising out of activities performed previously on the site. In its efforts to cover such risks, Hartmann carries out an environmental due diligence. This process involves a mapping out of national legislation and regulations compared with the findings of the necessary physical environmental analyses.

Social relations and risksHartmann gives high priority to measures safeguarding health and safety in the workplace, the protection of human values in the local community, and the protec-tion of the people with whom Hartmann or its products are in contact.

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Repayment structure of bank debt and mortgages in DKKm

RISK MANAGEMENT

29

Hartmann’s management model, STEP®Human, is being implemented at all Group production plants to ensure that health and safety for its employees comply with the Group’s own internal standards. The model also ensures that Hartmann handles its social responsibility effectively and acts as a responsible player in the markets where it operates.

As is the case for the handling of environmental risks, the Group uses a due diligence process to uncover any important social risks in connection with the takeover of a company.

InsuranceHartmann has a comprehensive insurance program which reflects the extent and scope of the Group’s activities and geographical location. With its insurance program Hartmann endeavours to minimise the possible financial impact on the Group’s result of such occurrencies.

The destruction by fire of a production plant is the single biggest risk, because re-establishment may take a long time and involves the risk of losing business and market shares in the process. The cover arranged of all the indivi-dual sites includes comprehensive all-risk insurance poli-cies also covering damage by fire and consequential loss.

The Group is working highly systematically to prevent damage. In addition to 24 hour surveillance and fire-fighting procedures at all plants, sprinkler systems have been installed in almost all units.

Hartmann’s insurance program covers commercial and product liability, property and contents, business inter-ruption loss, occupational injuries, personal injury and environmental liability.

30

A strategy for sustainable development

Hartmann’s sustainability strategy builds upon six fun-damental management principles:

• Proactive actions - including continuous monitoring and the prioritisation

of preventive action in relation to e.g. energy consump-tion, use of resources and occupational accidents

• Systematic management - including internal and external certification of produc-

tion and work processes

• Life-cycle management - including the prioritisation by Management of the

Group’s development and production activities based on assessments of product life cycles

• Employee development - with a view to ensuring that the necessary sustaina-

bility competencies are present at all production plants in the Group

• Communication - with a view to ensuring that, inside the Group,

employees know and understand about sustainability activities, and that, outside the Group, there is open-ness in communications to stakeholders of the sus-tainability efforts undertaken

• Networks - with a view to ensuring that, inside the Group, the

knowledge and expertise accumulated is shared by and between employees, and that, outside the Group, authorities, customers and other stakeholders are allowed to share this knowledge and expertise

The primary tools in the implementation of Hartmann’s sustainability strategy are two management models, STEP®Environment and STEP®Human. The models ex-plain the implementation track for each their area in the form of five development steps ensuring the intro-duction of the principles of the sustainability strategy at all production plants in the Group.

Achievements in 2004Local sustainability reports were prepared for all produc-tion plants in 2004. For the third consecutive year, the local sustainability report for the Group’s Finnish produc-tion plant earned the prize for the best report in Finland.

With regard to environmental efforts, the production plant in Croatia qualified for STEP 4, which is the second-highest level in the STEP®Environment model, while the three production plants in South America qualified for

SUSTAINABLE DEVELOPMENT

What does sustainable development signify?To society:- a development that meets the needs of the

present generations without compromising the ability of future generations to meet their own needs (from the Brundtland Report, 1987)

To Hartmann:- a development allowing maximum financial

growth- results at the lowest possible impact on human

and environmental valuesIn practice:- the integration of considerations with regard to

environment, health, safety, social responsibility, quality, legislation and regulations in all aspects of the Group’s business development

In other words...To Hartmann, sustainability is about creating maximum value for customers, stakeholders, employees and the local community by means of a balanced development of its business. Accord-ingly, sustainability considerations are integrated in Hartmann’s vision, mission, values and strategy. Sustainability is a fundamental consideration in the Group’s business concept – the production of packaging on the basis of recycled paper.

Sustainability considerations are integrated in Hartmann’s vision, mission, values and strategy. Sustainability is a fundamental consideration in the production of packaging on the basis of recycled paper.

SUSTAINABLE DEVELOPMENT

31

BÆREDYGTIG UDVIKLING

STEP 5. Six of the remaining eight production plants worked throughout the year on STEP 5, with two plants operating at the level of STEP 3.

The Group’s environmental efforts also included a mapping out of the use of asbestos-containing materi-als at all Hartmann production plants to prevent any health and business risks. Only small quantities of as-bestos were found, and with a generally sound state of maintenance.

Another project in 2004 focused on Hartmann’s use of chemicals. In future, consumption levels of chemicals will be recorded and optimised by means of a special data base system developed in a collaborative effort with Dansk Toksikologi Center (Danish Toxicology Centre) and Dansk Hydraulisk Institut (DHI – Water & Environment).

With regard to health, safety and social activities, the plants in Malaysia and Canada qualified for STEP 3 in the STEP®Human model.

In 2003 Hartmann drew up ten sustainability principles that specify its social commitment, cf. the Hartmann Annual Report 2003. In 2004 these principles were integrated into the Group’s efforts to implement the sustainability strategy.

Agenda 2005

Efforts to implement STEP®Environment continue, and the production plants in Israel and Canada are schedul-ed to complete STEP 3 in the course of 2005. Also, all production plants are expected to complete STEP 3 of the STEP®Human model in 2005.

By means of a system of scorecards, assessments are made of existing business procedures to identify their compliance with the intentions behind the sustainability principles, e.g. in connection with the prevention of discrimination in recruitment, promotion and dismissal procedures.

Lastly, Hartmann will roll out a new supplier evaluation system, SES, in 2005. The system will be an important tool in the Group’s efforts to prevent risks and exploit opportunities in the supply chain. The most important suppliers will be evaluated under the SES principles in the course of 2005.

Hartmann’s efforts to promote a sustainable development includingthe STEP models are described and documented in detail on the Group’s website. Go to http://www.hartmann.dk

32

The work of the Board of Directors in 2004

According to its order of business, the Board of Direc-tors of the Hartmann Group meets minimum five times a year according to a meeting schedule decided in advance. In 2004 the Board held seven meetings to discuss topical issues relating to the development of the Group’s business activities and financial position and the strategy for long-term growth. The Board also regularly reviewed the Group’s internal procedures and proces-ses to assess the need for possible revisions.

Once a year the Board performs a non-formalised self-assessment procedure, and the full Board subsequently discusses the outcome of the procedure and its implica-tions to the Board’s work and order of business.

Corporate GovernanceThe Board monitors the public debate on Corporate Governance in Denmark and decides to what extent it should be implemented in Hartmann’s management procedures and systems. Hartmann’s website includes

THE MANAGEMENT OF THE HARTMANN GROUP

The Board of Directors monitors the public debate on Corporate Governance and decides on an ongoing basis to what extent it should be implemented at Hartmann. A detailed statement is available on the Group’s website.

33

an account of the Group’s overall management struc-ture and the Board’s attitude to those areas in which Hartmann’s management practice deviates from the recommendations of the Noerby Committee. The account corresponds to the comments contained in previous annual reports on the matter.

The Board will review the Group’s overall management structure when the new Noerby Committee (set up by the Copenhagen Stock Exchange) has presented its recommendations.

New Board membersPrior to the Annual General Meeting on 15 April 2004, the Chairman of the Board, Mogens Petersen, announced his wish to retire from the Board, and the AGM elected COO Lars Rasmussen as his replacement. Trained as an engineer and holding an E*MBA, Lars Rasmussen has many years of management experience and an in-depth knowledge of industrial production a.o. from his time as Plant Manager and Divisional Manager with Coloplast A/S, where he is now a member of the Group Executive Board with a.o. research, product development, technology and production as his areas of responsibility. At its first meeting after the AGM in 2004, the Board elected Bjarne Eriksen Chairman, and John Gath was elected Vice-Chairman.

John Gath has announced that he wishes to resign from the Board at the upcoming ordinary AGM in keeping with the Group’s Corporate Governance rules on age limits. The Board plans to recommend the election to the Board of Walther Vishof Paulsen at the upcoming ordi-nary AGM, and the candidature should be seen against the background of his comprehensive international ex-posure at management level and his in-depth knowlegde of economic and financial affairs. Walther V. Paulsen (56) holds a MSc from Aarhus School of Business and was a.o. Executive Director and a board member of Carlsberg Breweries 1985-2000.

Walther Paulsen is Chairman of the board of Dantherm Holding A/S, Royal Scandinavia A/S, Hotel Koldingfjord A/S and Øko-Invest A/S. He is Vice-Chairman of the board in Dan-Ejendomme Holding A/S and Vital Petfood Group A/S. Furthermore, board member of Danske Invest Administration A/S, C.W. Obel A/S, Det Obelske Familiefond, Sanistål A/S and Thrige-Titan A/S.

Also, Walther Paulsen is Senior Adviser with the recruit-ment and consultancy firm Heidrick & Struggles.

Printing Unit Employee Niels Chr. Petersen joined the Hartmann Board of Directors on 1 January 2005. Niels Chr. Petersen was elected deputy by the employees in 2002 and has been with Brødrene Hartmann A/S, Tønder since 1988.

New Group Management team - GECBased on the wish to exploit its international manage-ment competencies in full and to reflect the focus it places on the four core business areas, Hartmann has set up a new Group Management team – the Group Executive Committee (GEC).

The members of the new international management team are:

• Asger Domino, President & CEO • Fernando Silveira Filho, President, Hartmann South America• Per Vinge Frederiksen, Executive Director, Egg & Fruit Packaging Europe• Michael Hedegaard Lyng, CFO• Steen Ulrik Madsen, Executive Director, Industrial Packaging• Ash Sahi, President, Hartmann North America

The combination of different cultural backgrounds, a wide commercial experience and an in-depth knowledge of the core business areas gives a strong basis to the GEC.

As mentioned on page 5 it has been decided to extend the GEC to include a new technical director (CTO), expected to start in 2005. The appointment should se-cure a strengthening of work within technology, inno-vation and processes.

THE MANAGEMENT OF THE HARTMANN GROUP

34

No. of shares 3,080,895

Denomination DKK 20

ISIN code DK0010256197

Reuter code HARTb.CO

Bloomberg code HARTB DC

Data of the Hartmann B share

Share capital and share classes

The share capital of Brødrene Hartmann A/S amounts to DKK 70,150,900. The shares, which are all in denomi-nations of DKK 20 or multiples thereof, are divided into three classes: A, AA and B. A and AA shares represent 10 votes per share of DKK 20, whereas B shares repre-sent 1 vote per share of DKK 20.

The total number of A and AA shares, representing DKK 8,533,000 of the total capital of the company, is held by the Brødrene Hartmann Foundation. According to the Foundation’s Charter, these shares cannot be sold as long as the Foundation exists. The B shares are listed on the Copenhagen Stock Exchange (CSE).

The performance of the B share

At the closing of FY 2004, the Hartmann share was listed at a price of DKK 120 per share, a decline of DKK 10 per share (or 7.7%) from the price listed at year-end 2003 (at 1 March 2005 the price was DKK 131 per share). In comparison the KFX (the CSE index of the most liquid shares) rose 17.3%, with a 32.4% increase in 2004 in the CSE SmallCap+ index which includes the Hartmann share. The average monthly trading in the Hartmann share at the CSE came to DKK 19.2 million in 2004, more than a doubling of the year-earlier level.

ShareholdersAt 1 March 2005 the Group had 3,000 shareholders, including holders of employee shares, and 1,746 of them had effected name registration of their shares. Com-pared to 1 March 2004 this reflects an increase of 516 shareholders or 20.8%. Four shareholders have filed holdings of more than 5% of the share capital.

Members of the Board of Directors and the Execu-tive Board held approx. 0.3% of the Group’s share

INVESTOR RELATIONS

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January April July October December 2004 2004 2004 2004 2004

The performance of the Hartmann share in 2004

The Hartmann share

CSE Mid Cap+

CSE Small Cap+

CSE, KAX

CSE, All-share index

Hartmann’s share capital is divided into three classes: A, AA and B with all A and AA shares being held by the Brødrene Hartmann Foundation. The B shares are listed on the Copenhagen Stock Exchange.

INVESTOR RELATIONS

Januar April Juli October December 2004 2004 2004 2004 2004

35

capital at 31 December 2004. The Group’s portfolio of treasury shares totalled 2.9% of the share capital and is intended for use in share-based incentive schemes, cf. note 2 on p. 56-57.

Investor relationsTo ensure a fair pricing for the Hartmann share and a satisfactory market liquidity, the Group’s investor relations policy is designed so as to provide a high level of informa-tion to external parties. With its investor relations activi-ties the Group endeavours to give existing and potential shareholders a basis for assessing its business develop-ments and financial position as well as its prospects for the future. These investor relations activities include:

• Annual reports and quarterly reports in Danish and English

• Stock exchange releases in Danish and English• Investor presentations and webcasts at regular intervals

• Update of the website on an ongoing basis - www.hartmann.dk• Individual investor meetings

In 2004 Hartmann held two open meetings for investors and the press in connection with the presentation of the Group’s Annual Report and Interim Report, respectively. Hartmann also attended private investor meetings and hosted an open house event organised by The Danish Shareholder Association. Hartmann is also included on the CSE Plus-Portal (www.plus-portal.dk).

DividendIt is Hartmann’s policy to declare an annual dividend which represents approx. 30% of the profit for the year after tax. Against the backdrop of the performance in 2004, the Board of Directors recommends to the Annu-al General Meeting as stated in the Management Report that no dividend be declared for 2004.

2004 2003 2002 2001 2000

No. of shares (less treasury shares) No. of units 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545

Earnings per share (EPS) DKK -35.9 0.2 6.2 13.8 10.9

Book value per share DKK 170 204 211 242 244

Listed price per share at year-end DKK 120 130 118 125 111

Price/earning at year-end DKK -3.3 650 19.1 9.1 10.2

Dividend per share DKK - - 2.0 4.8 3.5

Pay-out ratio % - - 33.2 34.3 32.1

Cash flow per share DKK 21.6 29.4 15.6 35.9 45.5

Market value DKKm 409 443 403 426 378

Market value, free float DKKm 370 394 359 379 336

Listed price/book value 0.70 0.64 0.56 0.52 0.45

Share-related key f igures

Year-end 2004 Year-end 2003

Share class Ownership (%)

Voting rights (%)

Ownership (%)

Voting rights (%)

The Brødrene Hartmann Foundation A, AA, B 20.0 61.8 20.0 61.8

LD – (the Danish Employees’ Capital Pension Fund) B 15.0 7.2 15.0 7.2

ATP – (the Danish Labour Market Supplementary Pension Scheme) B 10.3 4.9 11.4 5.4

Asset Manager BankInvest Danske Small Cap shares B - - 6.8 3.3

Thor Stadil, attorney-at-law B >5.0 >2.4 >5.0 >2.4

Treasury shares B 2.9 1.4 2.9 1.4

Total >53.2 >77.7 > 61.1 >81.5

Major shareholders

INVESTOR RELATIONS

36

AKTIONÆR FORHOLD

37

15 March 2005 Release of the consolidated financial statements 2004

16 March 2005 Investor presentation on FY 2004 at 8:15 am at the Copenhagen Marriott Hotel, Kalvebod Brygge 5, DK-1560 Copenhagen V

19 April 2005 Ordinary Annual General Meeting at 2 pm at the Scandic Hotel Eremitage, Klampenborgvej, Lyngby Storcenter 62, DK-2800 Kgs. Lyngby

26 May 2005 Report for 1Q 2005

22 August 2005 Report for 2Q 2005

23 August 2005 Investor presentation on 1H 2005 at 8:15 am at the Copenhagen Marriott Hotel, Kalvebod Brygge 5, DK-1560 Copenhagen V

24 November 2005 Report for 3Q 2005 and financial diary 2006

Financial diary 2005

Analyst coverage

The performance of the Hartmann share is being watched by:

• Alfred Berg Bank, Kitty Grøn

+45 3396 1926 – [email protected]

• Carnegie Bank, Christian Reinholdt


• Danske Equities, Michael West Hybholt


• HSH Gudme, Peter Nyborg Moltke


Contacts with shareholders and analysts• Asger Domino, President & CEO


Phone: +45 45 87 50 30 · Fax: +45 45 87 96 33

• Michael Hedegaard Lyng, CFO


Phone: +45 45 87 50 30 · Fax: +45 45 87 19 68

• Investor relations secretariat

Ruth Pedersen, Head of Secretariat


Phone: +45 45 87 50 30 ·Fax : +45 45 87 96 33

Annual General Meeting The Group’s Annual General Meeting will be held on Tuesday, 19 April 2005, at 2 pm at the Scandic Hotel Eremitage, Klampenborgvej, Lyngby Storcenter 62, DK-2800 Kgs. Lyngby.

The agenda of the AGM includes the following impor-tant items:• Election of new board member. The Board of Direc-

tors recommends the election of Walther V. Paulsen. According to Hartmann’s internal Corporate Gover-nance guidelines, board members should resign in the year they turn 70. It is in pursuance of this policy that John Gath wishes to retire from the Board.

• In consequence of the new Danish Financial State-ments Act, a motion to amend § 20 of the Articles of Association to the effect that in future, the Group’s annual report will be audited by only one auditor (state-authorised accountant) appointed by the AGM for a term of one year is put forward.

• A proposal is brought that the possibility of electing a deputy director is withdrawn, so that §13, subsection 2 of the Articles of Association re election of deputy director is cancelled.

Stock exchange releases in 2004 Hartmann issued 15 stock exchange releases in 2004, and they are all available on the Group’s website.

The most important releases were: 22 March 2004 – Release of the consolidated

financial statements 2003

25 March 2004 – Information regarding change

in the composition of the Board

of Directors of Brødrene

Hartmann A/S

5 April 2004 – New President in

Hartmann North America

18 May 2004 – Report for 1Q 2004

26 August 2004 – Report for 2Q 2004

23 November 2004 – Report for 3Q 2004 23 November 2004 – Financial diary for 2005

Stock exchange releases issued after the closing of FY 2004: 3 January 2005 – New member of the board

elected by the employees

21 January 2005 – Write-down of goodwill

relating to North America

26 January 2005 – Small fire at the Hartmann

plant in Canada

INVESTOR RELATIONS

38

Board members elected by the AGM sit for a term of 3 years,

whereas board members elected by the employees sit for a term

of 4 years.

The members of the Board of Directors and the Executive Board

held the following directorships and executive positions in other

Danish limited companies at 1 March 2005:

Members of the Board of Directors hold a total of 9,326 shares in


No options or warrants are allocated to members of the Board of

Directors.

CB: Chairman of the Board

VCB: Vice-Chairman of the Board

MB: Member of the Board

Chairman

Bjarne Eriksen (51)

Director, Julius Koch A/S

Joined the Board on 18 May 1999

Reelected on 10 April 2003, term expiring in April 2006

Chairman since 15 April 2004

MB: The Brødrene Hartmann Foundation

Vice-Chairman

John Gath (69)

Director, Strategia Finans A/S


Reelected on 6 May 2002, term expiring in April 2005

Vice-Chairman since 18 May 1999

CB: The Brødrene Hartmann Foundation

MB: Arkil A/S, Arkil Holding A/S, Strategia Finans A/S

Stephen Horner (53)

Director of Legal Affairs, EMI Music Denmark A/S

Joined the Board on 10 June 1985


MB: The Brødrene Hartmann Foundation

Bjarne Eriksen

Chairman

John Gath

Vice-Chairman

Stephen Horner

Lars RasmussenPeter-Ulrik Plesner Preben Schou

HARTMANN BOARD OF DIRECTORS

BOARD OF DIRECTORS

39

Peter-Ulrik Plesner (58)

Attorney-at-law, Plesner Svane Grønborg, Law Firm

Joined the Board on 12 November 1982


CB: Eva Denmark A/S, Johan Mangor A/S, Piet Hein A/S, Triumph

International Textil A/S

MB: The Ida Løfberg Foundation, the Brødrene Hartmann Foundation

Lars Rasmussen (46)

COO, Coloplast A/S

Joined the Board on 15 April 2004, term expiring in April 2007

VCB: Investeringsselskabet af 26. november 2003 A/S

MB: LM Glasfiber Holding A/S, Bie & Berntsen A/S

Preben Schou (68)

Director



CB: Siemens Aktieselskab

MB: The Gerda & Victor B. Strand Foundation/the Toms Gruppens

Foundation

Harry Nielsen* (56)

European Process Efficiency



Niels Christian Petersen* (50)

Printing Unit Employee

Joined the Board on 1 January 2005, term expiring in April 2006

Svend Wind* (49)

Laboratory Assistant



* Elected by the employees

Harry Nielsen Niels Christian Petersen Svend Wind

HARTMANN BOARD OF DIRECTORS

40

Ash Sahi

Steen Ulrik MadsenPer Vinge Frederiksen

Per Vinge Frederiksen* (43)

Executive Director, responsible for Egg & Fruit Packaging

Europe and Asia, the CHP plant and Hartmann Technology

Joined Hartmann in March 2000.

Appointed Executive Director in May 2001

VCB: DanFiber A/S

Michael Hedegaard Lyng (35)

CFO, Group responsibility for Finance, IT, HR and

Corporate Communications as well as Skjern Papirfabrik A/S

Joined Hartmann in July 2001

Asger Domino* (45)

President & CEO

Joined Hartmann in February 1989

Appointed CEO in May 2001

CB: Buhl & Bønsøe A/S

MB: GN Store Nord a/s

Fernando Silveira Filho (50)

President, Hartmann South America

Joined Hartmann in August 2002

GROUP EXECUTIVE COMMITTEE (GEC)

HARTMANN GROUP EXECUTIVE COMMITTEE

41

Fernando Silveira Filho

Asger DominoMichael Hedegaard Lyng

Steen Ulrik Madsen* (44)

Executive Director, responsible for Industrial Packaging

and Sustainable Development

Joined Hartmann in January 1993

Appointed Executive Director in May 2001

MB: Spejder Sport A/S, TK Energi A/S

Ash Sahi (48)

President, Hartmann North America

Joined Hartmann in May 2004

HARTMANN GROUP EXECUTIVE COMMITTEE

The Group Executive Committee holds a total of 2,644 shares

in Brødrene Hartmann A/S. To this should be added the share

options issued, cf. note 2 on p. 56-57.

* Registered with the Danish Commerce and Companies agency.

43

ANNUAL ACCOUNTS CONTENTS


Statement by the Management & the auditors 48

Income statement 49

Balance - assets 50



Movements in capital and reserves 53


List of contents notes 55

Notes 56


AN

NU

AL

AC

CO

UN

TS

Basis of accountingThe annual report 2004 of Brødrene Hartmann A/S has been prepared in accordance with international accounting standards (IFRS) and further financial reporting requirements to the presentation of accounts by listed companies.

Further financial reporting requirements include the requirements of the Danish Financial Statements Act to listed companies and the requirements of the Copenhagen Stock Exchange to financial reporting by listed companies.

The annual report is presented in accordance with the accounting stan-dards approved by the EU.

Previously the annual report has been presented in accordance with the Danish Financial Statements Act and the Danish accounting guidelines as the primary basis of accounting.

As the transition to IFRS as the primary basis of accounting did not affect the accounting policies used for the presentation of the accounts, the ac-counting policies applied are consistent with those of last year.

The accounting policies used for the presentation of the accounts came into force on 31 December 2004. Accordingly, there has been no early implementation of new or updated accounting standards.

The Group did not acquire any enterprises in the period after 31 March 2004. Accordingly, the accounting treatment of business combinations, including goodwill, follows the provisions of IAS 22 (‘Business Combinations’) which applies to business combinations made not later than 31 March 2004.

ReclassificationThe following items were reclassified in 2004:• Cash discounts are no longer recognised under interest income and expense and similar items, but are now set off directly against revenue or production costs. • Deferred tax liabilities, pensions and similar obligations, and provisions are no longer booked separately (provisions) in the balance, but are included in long-term, respectively short-term, provisions.

The reclassification has no effect on consolidated profit/loss and capital and reserves.

The comparative figures have been adjusted accordingly.

Consolidated financial statements The consolidated financial statements comprise the parent company, Brødrene Hartmann A/S, and enterprises in which the parent company directly or indirectly holds more than 50% of the voting rights or which the parent company in some other way controls (subsidiaries). Enter-prises in which the Group holds between 20% and 50% of the voting rights and over which it exercises significant influence, but which it does not control, are considered associates.

The consolidated financial statements are prepared on the basis of the financial statements of the parent company and the subsidiaries by con-solidating uniform accounting items. The financial statements used for the annual report of the Group have been prepared in accordance with the Group’s accounting policies.

On consolidation, intra-group income and expenses, shareholdings, in-tra-group dividends and balances, and realised and unrealised gains and losses on intra-group transactions are eliminated.

The parent company’s investments in the consolidated subsidiaries are set off against the parent company’s share of the subsidiaries’ fair value of identifiable net assets determined at the date of the consolidation.

Enterprises acquired or formed during the year are recognised in the consolidated financial statements from the date of acquisition or for-mation. Enterprises disposed of or liquidated are recognised in the con-solidated income statement until the date of disposal. The comparative figures are not adjusted for acquisitions or disposals.

Acquisitions of enterprises in which the parent company obtains con-trol are accounted for by using the purchase method in pursuance of IAS 22. The identifiable assets and liabilities of acquired enterprises are stated at their fair value at the date of acquisition.

Goodwill represents any excess of the cost of the acquisition over the fair value of the identifiable assets and liabilities acquired, including provisions for existing, adopted and announced plans to restructure the acquired enterprise. Identifiable intangible assets are recognised insofar as they can be separated or arise from a contractual right and a reliable fair value can be found. The tax effect of the restatement of assets and liabilities is taken into account.

Goodwill is recognised in the consolidated financial statements as in-tangible assets and in the parent company’s financial statements as part of investments in subsidiaries and associates. Goodwill is amortised on a straight-line basis in the income statement over the useful life of the asset, not exceeding 20 years.

Goodwill from acquired enterprises is adjusted until the end of the year following the acquisition provided that the fair value of identifiable assets and liabilities subsequently proves different from that anticipat-ed at the date of acquisition. Hereafter, goodwill is adjusted solely if provisions for restructuring in the acquired enterprise are not used as intended and therefore are to be referred, or as a result of changes in estimates of conditional acquisition prices. All other adjustments are recognised in the income statement.

Gains or losses on disposal or liquidation of subsidiaries and associates are stated as the difference between the sales amount or liquidation amount and the carrying amount of net assets at the date of disposal plus anticipated disposal or liquidation costs.

Minority interestsIn calculating the consolidated profit/loss and consolidated capital and reserves, the proportionate shares of the subsidiaries’ results and cap-ital and reserves which can be attributed to minority interests are stated separately in the income statement and balance sheet.

Foreign currency translationOn initial recognition, transactions denominated in foreign currencies are translated at the exchange rates at the transaction date. Gains and losses arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as interest income or expense and similar items.

Receivables, payables and other monetary items denominated in foreign currencies are translated at the exchange rates at the balance sheet date. The difference between the exchange rates at the balance sheet date and at the transaction date is recognised in the income statement as interest income or expense and similar items.

Foreign exchange adjustments of intra-group balances with foreign subsidiaries which are considered part of the total investment in the subsidiary are recognised directly in capital and reserves. Foreign ex-change gains and losses on loans and derivative financial instruments designated as hedges of foreign subsidiaries which effectively set off foreign exchange gains and losses on investments in the subsidiary are also recognised directly in capital and reserves.

On recognition of foreign subsidiaries and associates, income state-ment items are translated at the average exchange rates for the month, and balance sheet items including goodwill recognised on acquisition of the foreign enterprises are translated at the foreign exchange rates at the balance sheet date. Foreign exchange differences arising on the translation of foreign subsidiaries’ capital and reserves at the beginning of the year at the foreign exchange rates at the balance sheet date and on the translation of income statement items from average rates to the rates of the balance sheet date are recognised directly in capital and reserves.

Incentive schemesWhen share options are issued to members of the Executive Board and a number of executive employees at an exercise price corresponding at least to the market price of the parent company at the time of adoption or allotment, the theoretical value of the benefit is not recognised in the income statement. Exercise of options is adjusted over capital and reserves.

Derivative financial instrumentsDerivative financial instruments are initially recognised in the balance sheet at cost and are subsequently measured at fair value. Positive and negative fair value adjustments of derivative financial instruments are in-cluded in other receivables and payables, respectively, and positive and negative value adjustments are set off solely when the enterprise has the right to, and intends to, settle several contracts simultaneously (settle-ment of difference).

44

ACCOUNTING POLICIES

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recog-nised asset or liability are recognised in the income statement together with changes in the fair value of the hedged asset or liability as regards the hedged part.

Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of future cash flows and effectively hedging changes in the value of the hedged item are recognis-ed as receivables or payables and in capital and reserves. Income and expenses relating to such hedging transactions are transferred from capital and reserves upon the realisation of the hedged item and recog-nised in the same item as the hedged item.

For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement as interest in-come and expense and similar items as they occur.

Income statementRevenueRevenue from the sale of goods for resale and finished goods is recognis-ed in the income statement provided that delivery and transfer of risk to the buyer has taken place before year-end and that the income can be reliably measured and is expected to be received. Revenue is measured excl. VAT, and granted discounts are included in the revenue.

Contract work in progress concerning the production of moulding ma-chines in Hartmann Technology is recognised as revenue by reference to the stage of completion. Accordingly, revenue corresponds to the selling price of work performed during the year (the percentage of completion method). Revenue is recognised when total income and expenses and the stage of completion of the contract at the balance sheet date can be reliably calculated and when it is probable that the economic benefits, including payment, will flow to the Group.

Production costsProduction costs comprise direct and indirect costs, including deprecia-tion and amortisation and salaries, incurred in generating the revenue for the year.

Production costs also comprise research costs and development costs which do not qualify for capitalisation. Also, amortisation of develop-ment costs is recognised.

Distribution and sales costsDistribution and sales costs comprise costs for freight, sales staff, adver-tising, exhibitions and depreciation.

Administrative expensesAdministrative expenses comprise expenses for administrative staff, management, office premises, office expenses and depreciation.

Other operating income and costsOther operating income and costs comprise items secondary to the principal activities of the enterprises.

Profit/loss from investments in subsidiaries and associatesThe proportionate share of the results before tax of the individual sub-sidiaries is recognised in the income statement of the parent company after full elimination of intra-group profits/losses.

The proportionate share of the results before tax of the associates is recognised in both the parent company and the consolidated income statement after elimination of the proportionate share of intra-group profits/losses.

Interest income and expense and similar itemsInterest income and expense and similar items comprise interest income and expense, realised and unrealised foreign exchange adjustments, gains, losses and write-downs on securities, amortisation of liabilities as well as surcharges and refunds under the on-account tax scheme. Also included are realised and unrealised gains and losses relating to derivative financial instruments which cannot be classified as hedges.

Tax on profit/loss for the yearThe parent company is jointly taxed with all Danish subsidiaries and a number of the foreign subsidiaries. The current Danish corporation tax is allocated proportionately between those Danish companies that have

a positive taxable income. The jointly taxed companies are taxed under the on-account tax scheme.

Tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit/loss for the year is recog-nised in the income statement, and the tax expense relating to amounts directly recognised in capital and reserves is recognised directly in capital and reserves.

Cash flow statementThe cash flow statement shows the Group’s cash flows from operating, investment and financing activities for the year, the year’s changes in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year.

The cash flow effect of acquisitions and disposals of enterprises is shown separately in cash flows from investment activities. Cash flows from acquisitions of enterprises are recognised in the cash flow statement from the date of acquisition. Cash flows from disposals of enterprises are recognised up until the date of disposal.

Cash flows from operating activitiesCash flows from operating activities are calculated as the profit/loss for the year adjusted for non-cash operating items, changes in working capital and corporation tax paid.

Cash flows from investment activitiesCash flows from investment activities comprise payments in connection with acquisitions and disposals of intangible and tangible assets, including acquisition of enterprises.

Cash flows from financing activitiesCash flows from financing activities comprise cash flows from the raising of loans and repayment of interest-bearing debt, changes in the size or com-position of the share capital including acquisition and disposal of treasury shares and related costs, and payment of dividends to shareholders.

Cash and cash equivalentsCash and cash equivalents comprise cash, short-term bank debt and mar-ketable securities with a term of three months or less, which may unim-pededly be turned into cash and cash equivalents, and which are subject to an insignificant risk of changes in value.

The cash flow statement cannot be derived solely from the published financial statements.

Balance sheet Intangible fixed assets

Goodwill Goodwill is measured at cost less amortisation and impairment. Pursuant to IAS 22, goodwill is amortised on a straight-line basis over the esti-mated useful life, not exceeding 20 years.

Development projectsDevelopment projects comprise salaries, amortisation and other costs directly or indirectly attributable to the Group’s development activities.

Development projects that are clearly defined and identifiable, where the technical utilisation degree, sufficient resources and potential future market or development opportunities in the Group are evidenced, and where the Group intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that the value in use of future earnings can cover production costs, distribution costs and admi-nistrative expenses as well as development costs.

Development projects which do not meet the criteria for recognition in the balance sheet are recognised in the income statement when the costs occur.

Capitalised development costs are measured at cost less accumulated amortisation.

Following the completion of the development work, capitalised develop-ment costs are amortised on a straight-line basis over the estimated use-ful life. The amortisation period is 5-10 years.

45

ACCOUNTING POLICIES

Property, plant and equipmentProperty, plant and equipment are measured at cost less accumulated depreciation and impairment.

Cost comprises the purchase price and any costs directly attributable to the acquisition until the date when the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of wages and salaries, materials, components and sub-suppliers.

Depreciation is calculated as cost less any residual value and is provided on a straight-line basis over the expected useful life of the assets. The expected useful life is as follows:

• Buildings 25 years• Plant and machinery 5-15 years• Fixtures and fittings, tools and equipment 5-10 years• IT equipment incl. basic programs 3-5 years

There is no depreciation on land.

Depreciation is recognised in the income statement as production costs, distribution costs and administrative expenses, respectively.

Gains and losses on the disposal of property, plant and equipment are determined as the difference between the sales price less disposal costs and the carrying amount at the date of disposal. Gains or losses are re-cognised in the income statement in the item under which the assets are depreciated.

Leasing (parent company)Leases of property, plant and equipment in which the parent company obtains the title, but for which all material risks and maintenance obliga-tions are assigned to the subsidiary (finance leases), are recognised in the balance sheet of the parent company in the same way as other long-term assets. The cost of finance leases is stated as the net present value of future lease payments. For the calculation of the net present value, the interest rate used in the lease is used as discount rate.

Investments in subsidiaries and associatesInvestments in subsidiaries and associates are measured according to the equity method and are measured in the balance sheet at the proportion-ate share of the enterprises’ net asset values calculated in accordance with the parent company’s accounting policies minus or plus unrealised intra-group profits and losses.

Subsidiaries and associates with negative net asset values are measured at DKK 0 (nil).

Where the parent company has a legal or constructive obligation to cover the enterprise’s deficit, a provision or liability in relation thereto will be recognised.

Net revaluation of investments in subsidiaries and associates is transfer-red to the reserve for net revaluation according to the equity method in capital and reserves to the extent that the carrying amount exceeds the cost of acquisition.

Other investmentsSecuritiesSecurities relating to unlisted foreign companies available for sale are ini-tially recognised under long-term assets at cost at the date of acquisition with subsequent measurement at estimated fair value determined on the basis of market data and approved valuation methods for unlisted securities. If a reliable fair value cannot be calculated, securities are measured at cost.

Unrealised fair value adjustments are recognised in capital and reserves, however to the exclusion of write-downs resulting from impairment and the reversal thereof, which will be recognised in the income statement under interest income and expense and similar items. Upon a sale, the accumulated fair value adjustment recognised in capital and reserves are transferred to interest income and expense and similar items in the in-come statement.

Impairment of assetsThe carrying amount of the Group’s intangible assets, tangible assets and other long-term assets, except for deferred tax assets, is assessed annually to look for any indication that an asset may be impaired. When such an indication exists, the recoverable amount of the asset is assessed. The re-coverable amount is the higher of the net selling price and the value in use of the asset. An impairment loss is recognised when the carrying amount of an asset or its cash-generating unit exceeds the recoverable amount of

the asset or its cash-generating unit. Impairment losses are recognised in the income statement.

Goodwill write-downs are not reversed.

Reversals of write-downs for impairment are made to the extent that changes have occurred in the assumptions and estimates used to deter-mine write-downs.

Reversals of write-downs for impairment are made only to the extent that the new carrying amount of the asset does not exceed the carrying amount it would have had upon impairment had the original write-down not been made.

InventoriesInventories are measured at cost in accordance with the weighted average cost method. Where the net realisable value is lower than cost, inventories are written down to this lower value.

Goods for resale, raw materials and consumables are measured at cost, comprising purchase price plus delivery costs.

Finished goods and work in progress are measured at cost, comprising the cost of raw materials, consumables, direct wages and salaries plus indirect production overheads. Indirect production overheads comprise indirect materials and wages and salaries as well as maintenance and depreciation of production machinery, buildings and equipment as well as factory admini-stration and management. Borrowing costs are not recognised.

The net realisable value of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale and is determined by taking into account marketability, obsolescence and development in expected sales price.

ReceivablesReceivables are measured at amortised cost minus impairment losses.

Contract work in progressContract work in progress is measured at the selling price of the work performed. The selling price is measured by reference to the stage of completion at the balance sheet date and the total expected income from the individual contract. The stage of completion is determined based on an assessment of the work performed.

Individual contract work in progress is recognised in the balance sheet under receivables or payables depending on the net amount of the selling price less progress billings and prepayments.

Selling costs and costs incurred in securing contracts are recognised in the income statement when incurred.

PrepaymentsPrepayments, included in assets, comprise costs incurred concerning subsequent financial years.

Capital and reservesShare premium fundThe share premium fund comprises amounts paid as a premium in con-nection with the issue of shares as well as amounts received by the en-terprise from the sale of shares not called for at the issue of bonus shares minus costs relating to issues completed.

The obligation to maintain a share premium fund was lifted in 2004. However, the share premium fund will remain an account under capital and reserves until the next AGM, when it will become a distributable reserve since Hartmann’s Articles of Association do not stipulate the establishment of a special fund under capital and reserves.

Consequently, the amount in the fund has been transferred to ‘retained earnings’.

Reserve for net revaluation according to the equity methodReserve for net revaluation according to the equity method comprises the parent company’s share in retained earnings (net profit minus divi-dends paid) in subsidiaries and associates that are valued according to the equity method minus the share of any losses in these enterprises. Other movements in the net asset value of the enterprises in question which are taken directly to capital and reserves are also recognised in the reserve.

The net revaluation reserve can be used to eliminate losses in the parent company and to issue bonus shares.

46

ACCOUNTING POLICIES

Equally, amounts included in the net revaluation reserve concerning a subsidiary or an associate will be released when the subsidiary or as-sociate is dissolved or sold.

DividendsProposed dividends are recognised as a liability at the date when they are adopted at the AGM. The proposed dividend payment for the year is disclosed as a separate item under capital and reserves. Treasury sharesCost of acquisition, consideration received and dividend received on trea-sury shares acquired by the parent company or the subsidiaries are recog-nised directly as retained earnings in capital and reserves. Accordingly, gains and losses from the sale of treasury shares are not recognised in the income statement.

Provisions for pensionPayments made to defined contribution plans are recognised in the in-come statement in the period to which they relate, and any outstanding payments are recognised in the balance sheet under other payables.

For defined benefit plans, actuarial computations are made of the value in use of future benefits payable under the pension plan. The computation of the value in use is based on assumptions about the future development of factors such as wages and salaries, interest, inflation and mortality rates. The value in use is computed solely for the benefits to which the employees are entitled because of their employment in the Group. The actuarial computation of the value in use minus the market value of any assets related to the pension plan is recognised in the balance sheet un-der pension commitments.

Corporation tax and deferred taxCurrent tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of previous years and for tax paid on account.

Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax base of assets and liabilities. However, deferred tax is not recognised on tem-porary differences relating to goodwill which is not deductible for tax purposes and other items where temporary differences - apart from business acquisitions - arise at the date of acquisition without affecting either profit/loss for the year or taxable income.

Where alternative tax rules can be applied to determine the tax base, deferred tax is measured on the basis of planned use of the asset or settlement of the liability, respectively.

Deferred tax assets, including the tax base of tax loss carryforwards, are measured at the expected value of their utilisation, either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction.

Adjustment is made to deferred tax relating to unrealised intra-group profits and losses.

Deferred tax is measured according to the tax rules and at the tax rates applicable in the respective countries at the balance sheet date when the deferred tax is expected to crystallise as current tax. The change in deferred tax as a result of changes in tax rates is recognised in the income statement.

Financial liabilitiesAmounts owed to mortgage credit institutions and banks are recognised at the date of borrowing at the net proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortised cost corresponding to the capitalised value using the effective interest rate. Accordingly, the difference between the proceeds and the nominal value (capital loss) is recognised in the income statement over the term of the loan.

Other liabilities are measured at net realisable value.

Government grantsGovernment grants received are recognised in the income statement in the period in which the corresponding costs are recognised. Grants re-lating to property, plant and equipment are recognised as liabilities in the balance sheet. The grants are recognised in the income statement over the useful life of the assets.

Other provisionsOther provisions mainly consist of guarantee obligations and obligations relating to restructuring.

Other obligations are recognised when, as a result of events occurring before or at the balance sheet date, the Group incurs a legal or a construc-tive obligation and it is probable that there may be an outflow of resources embodying economic benefits to settle the obligation.

Other obligations are measured at the best estimate of the management with regard to the amount required to settle the obligation.

Guarantee obligations are recognised when goods and services are sold on the basis of guarantee costs incurred in previous fiscal years.

Costs for restructuring are recognised as liabilities provided that a detailed, formal restructuring plan has been announced to the persons involved not later than at the balance sheet date.

Presentation of discontinuing activitiesDiscontinuing activities constitute an entity for which it is possible to clearly distinguish its activities and cash flows from the rest of the Group both operationally and for financial reporting purposes. The entity either has been disposed of or has been turned into an entity for the purpose of disposal, and the disposal is expected to take place within twelve months pursuant to a formal plan.

Operating activities resulting from discontinuing activities are included line by line in the income statement with comparative figures. The notes will state revenue, costs, tax, profit/loss, assets and liabilities for the discontinuing activities.

Cash flows from operating, investment and financing activities of the discontinuing activities will be stated in a note.

Segment information

The Group’s main activities and primary segments are:• Egg & Fruit Packaging Europe• Egg & Fruit Packaging North America• Egg & Fruit Packaging South America• Egg & Fruit Packaging Asia• Industrial Packaging• Skjern Papirfabrik A/S (likely to be sold)

The Group’s geographical areas and secondary segments are:• Western Europe• Central and Eastern Europe• North America• South America• Asia

The division into segments is basically in accordance with the Group’s management structure and intra-group financial control.

Segment income and costs and cash flows from operating and investment activities as well as segment assets and liabilities comprise those items that are directly attributable to the individual segment and those items that can be allocated to the individual segment using a reasonable basis. Non-allocated items primarily comprise assets and liabilities as well as income and costs relating to the Group’s administrative functions, in-vestment activities, income taxes etc.

Segment fixed assets comprise fixed assets that are used directly in the operating activities of the segment including intangible assets, tangible assets and investments in associates.

Segment current assets comprise current assets used directly in the ope-rating activities of the segment including inventories, trade receivables, other receivables, prepayments and cash at bank and in hand.

Segment liabilities comprise liabilities resulting from the operating activi-ties of the segment including trade payables and other payables.

Key FiguresThe key figures were prepared in accordance with “Recommendations and key figures” from the Association of Danish Financial Analysts (ADFA). The Key figures in the Group’s highlights are defined on the back flap.

47

ACCOUNTING POLICIES

48

STATEMENT BY THE MANAGEMENT

STATEMENT BY THE MANAGEMENT

The Board of Directors and the Executive Board have today discussed and adopted the Annual Report 2004 for Brødrene Hartmann A/S.

The annual report has been prepared in accordance with the International Financial Reporting Standards (IFRS) and any further financial reporting re-quirements for listed companies. We consider the accounting policies applied to be appropriate. Accordingly, the annual report gives a true and fair view of the Group’s and the parent company’s assets and liabilities, financial position and the results of the Group’s and the parent company’s operations and the Group’s cash flows.

We recommend that the annual report be approved at the Annual General Meeting.

Kgs. Lyngby, 15 March 2005

Executive Board Asger Domino Per Vinge Frederiksen Steen Ulrik Madsen President & CEO Executive Director Executive Director

Board of Directors

Bjarne Eriksen John Gath Stephen Horner Chairman Vice-Chairman

Peter-Ulrik Plesner Preben Schou Lars Rasmussen

Harry Nielsen Svend Wind Niels Chr. Petersen

AUDITORS’ REPORT

To the shareholders of Brødrene Hartmann A/S

We have audited the annual report of Brødrene Hartmann A/S for the fiscal year 1 January – 31 December 2004. The report has been prepared in accordance with the International Financial Reporting Standards (IFRS) and any further financial reporting requirements for listed companies.

The annual report is the responsibility of the company’s Board of Directors and Executive Board. It is our responsibility to express an opinion on the annual report based on our audit.

Basis of opinionWe conducted our audit in accordance with Danish accounting standards. These standards require that we plan and perform the audit to obtain reasonable assurance that the annual report is free of material misstatement. The audit includes examining, on a test basis, evidence supporting the amounts and dis-closures in the annual report. The audit also includes assessing the accounting policies applied and significant estimates made by the Board of Directors and the Executive Board as well as evaluating the overall annual report presentation. We believe that our audit provides a reasonable basis for our opinion.

The audit did not result in any qualification.

OpinionIn our opinion, the annual report gives a true and fair view of the Group’s and the parent company’s assets and liabilities and financial position at 31 December 2004 and the results of the Group’s and the parent company’s operations and the Group’s cash flows for the fiscal year 1 January – 31 December 2004 in accordance with the International Financial Reporting Standards (IFRS) and any further financial reporting requirements for listed companies.

Copenhagen, 15 March 2005

KPMG C.Jespersen Grant ThorntonStatsautoriseret Revisionsinteressentskab Statsautoriseret Revisionsaktieselskab

Søren Thorup Sørensen Søren Christiansen Christian FløistrupState Authorised State Authorised State Authorised Public Accountant Public Accountant Public Accountant

49

Group Parent company

INCOME STATEMENT

Income statement amounts in DKKm1 January - 31 December

Note 2004 2003 2004 2003

1 Revenue 1,641.9 1,524.8 783.6 812.1

2,9,10 Production costs -1,242.9 -1,113.5 -621.5 -636.9

Gross profit 399.0 411.3 162.1 175.2

2,9,10 Distribution and sales costs -312.9 -292.8 -105.9 -97.6

2,9,10 Administrative expenses -93.1 -86.6 -54.1 -49.1

Other operating income 1.0 3.2 1.0 3.2

2,9,10,24 Restructuring -50.0 - -49.0 -

Operating result before goodwill amortisation and impairment (EBITA) -56.0 35.1 -45.9 31.7

8, 9 Goodwill amortisation and impairment -62.3 -6.2 -1.5 -1.6

Operating result (EBIT) -118.3 28.9 -47.4 30.1

11 Profit after tax in subsidiaries - - -86.6 0.7

13 Profit after tax in associates 0.2 0.2 0.2 0.2

3 Interest income and similar items 3.8 4.4 8.6 9.8

3 Interest expense and similar items -33.1 -34.5 -26.2 -31.9

Profit/loss before tax (EBT) -147.4 -1.0 -151.4 8.9

4 Tax on profit/loss for the year 24.7 0.4 29.0 -8.1

Profit/loss for the year -122.7 -0.6 -122.4 0.8

Share in profit/loss for the year to minorities 0.3 1.4 - -

Share in profit/loss for the year to Group (EAT) -122.4 0.8 -122.4 0.8

Proposal for the distribution of profit/loss:

Proposal for dividend for the fiscal year - -

Profit/loss carried forward -122.4 0.8

-122.4 0.8

5 Earnings per share in DKK (EPS) -35.9 0.2

5 Earnings per share in DKK, diluted (EPS) -35.9 0.2

50

Balance assets amounts in DKKm

31 December


BALANCE ASSETS

Note 2004 2003 2004 2003

Long-term assets

Intangible fixed assets

Development projects 4.2 15.7 4.2 15.7

8 Goodwill 10.7 72.6 10.7 12.2

9 Total intangible fixed assets 14.9 88.3 14.9 27.9

Property, plant and equipment

Land and buildings 243.5 254.9 102.4 108.2

Technical plant and machinery 627.3 652.0 190.5 208.8

Other operating assets 26.5 32.8 7.7 12.9

Plant under construction 29.5 21.0 25.4 10.9

10 Total property, plant and equipment 926.8 960.7 326.0 340.8

Other long-term assets

11 Investments in subsidiaries - - 789.1 559.8

12 Receivables from subsidiaries - - 79.1 311.2

13 Investments in associates 3.8 3.8 3.8 3.8

14 Other investments 33.3 10.7 29.8 10.7

20 Deferred tax assets 55.5 32.3 - -

Other long-term assets, total 92.6 46.8 901.8 885.5

Total long-term assets 1,034.3 1,095.8 1,242.7 1,254.2

Short-term assets

15 Inventories 112.4 114.0 46.0 46.6

Trade receivables 263.1 257.9 40.8 38.5

16 Contract work in progress 0.0 1.1 1.2 1.4

Receivables from subsidiaries - - 70.1 102.5

Receivable in corporation tax 2.6 4.3 0.2 1.3

Other receivables 36.5 40.8 22.3 16.8

Prepayments 6.6 12.1 4.8 7.6

Cash at bank and in hand 48.5 67.3 11.1 13.2

Total short-term assets 469.7 497.5 196.5 227.9

Total assets 1,504.0 1,593.3 1,439.2 1,482.1

51


BALANCE LIABILITIES

Balance liabilities amounts in DKKm 31 December

Note 2004 2003 2004 2003

Capital and reserves

17 Share capital 70.2 70.2 70.2 70.2

Premium on issue - 300.0 - 300.0

17 Profit brought forward 509.8 325.6 509.8 325.6

Proposal for dividend for the fiscal year - - - -

Total capital and reserves 580.0 695.8 580.0 695.8

18 Minorities 12.8 13.4 - -

Long-term obligations

20 Deferred tax 39.4 67.0 27.9 56.3

19 Pension obligations 17.4 16.2 - -

23 Mortgages 58.7 30.0 38.7 7.6

23 Bank debt 378.7 367.6 369.4 357.3

23 Other debt 14.1 9.4 14.1 9.5

22, 23 Government grants 13.3 15.6 9.0 10.0

Total long-term obligations 521.6 505.8 459.1 440.7

Short-term obligations

23 Part of long-term obligations accounted for by

short-term obligations 32.6 17.1 28.0 12.9

Bank debt 69.7 110.2 65.1 100.1

16 Prepayments from customers 4.9 4.9 4.9 4.9

Trade payables 122.0 108.6 69.5 47.2

Payable to subsidiaries - - 143.5 117.1

Payable to associates 3.8 3.7 2.2 2.7

Corporation tax 10.1 13.5 - -

21 Other provisions 16.5 8.2 15.5 0.7

Other debt 130.0 112.1 71.4 60.0

Total short-term obligations 389.6 378.3 400.1 345.6

Total obligations 911.2 884.1 859.2 786.3

Total liabilities 1,504.0 1,593.3 1,439.2 1,482.1


Note 2004 2003 2004 2003

Profit/loss for the year -122.7 -0.6 -122.4 0.8

6 Adjustments 217.6 130.0 155.6 68.9

7 Changes in working capital 32.5 10.9 94.4 156.1

Cash flows from operating activities before

interest income and expense and similar items 127.4 140.3 127.6 225.8

Received in dividend from other investments 0.8 0.7 0.8 0.7

Interest income 3.0 3.7 7.5 9.1

Interest payments -30.0 -38.4 -26.2 -23.0

Cash flows from ordinary operating activities 101.2 106.3 109.7 212.6

Paid in corporation tax, net -26.8 -6.2 -0.2 3.1

Cash flows from operating activities 74.4 100.1 109.5 215.7

Disposal of property, plant and equipment 5.0 11.3 1.6 7.6

Acquisition of property, plant and equipment -111.1 -207.8 -40.0 -31.0

Acquisition of intangible assets -0.8 -5.1 -0.8 -4.3

Received in government grants re assets - 0.9 - -

Received in dividend from associates 0.2 0.1 0.2 0.1

Received in dividend from subsidiaries - - 22.1 21.5

Capital infusion into subsidiaries - - -353.0 -135.0

Cash flows from investment activities -106.7 -200.6 -369.9 -141.1

Cash flows from operating and investment activities -32.3 -100.5 -260.4 74.6

Repayment of long-term financial obligations -25.9 -20.4 -20.3 -12.5

Establishment of long-term loan 80.7 101.8 80.7 101.8

Change in long-term receivables from subsidiaries - - 232.9 -199.6

Declared in dividend - -6.8 - -6.8

Cash flows from financing activities 54.8 74.6 293.3 -117.1

Total cash flows 22.5 -25.9 32.9 -42.5

Cash at bank and in hand and bank debt at 1 January -42.9 -15.8 -86.9 -44.4

Foreign exchange adjustment -0.8 -1.2 - -

Cash at bank and in hand and bank debt at 31 December -21.2 -42.9 -54.0 -86.9

Recognition of cash at bank and in hand

and bank debt at 31 December:

Cash at bank and in hand 48.5 67.3 11.1 13.2

Banks (short-term obligations) -69.7 -110.2 -65.1 -100.1

Cash at bank and in hand and bank debt at 31 December -21.2 -42.9 -54.0 -86.9

52

Cash flow statement amounts in DKKm 1 January - 31 December

CASH FLOW STATEMENT

53

MOVEMENTS IN CAPITAL AND RESERVES

Movements in capital and reserves amounts in DKKm

Group

Balance at 1 January 2003 70.2 300.0 340.1 7.0 717.3

Share in profit/loss for the year to Group - - 0.8 - 0.8

Declared in dividend - - 0.2 -7.0 -6.8

Foreign exchange adjustment re foreign subsidiaries - - -14.8 - -14.8

Foreign exchange adjustment re equity loans etc. - - -11.0 - -11.0

Tax value re price loss on employee shares from 1999 - - 1.8 - 1.8

Change in fair value of derivative financial instruments - - 10.4 - 10.4

Deferred tax re movements in capital and reserves - - -1.9 - -1.9

Balance at 31 December 2003 70.2 300.0 325.6 - 695.8

Share in profit/loss for the year to Group - - -122.4 - -122.4

Transfer - -300.0 300.0 - -


Foreign exchange adjustment re equity loans etc. - - 13.6 - 13.6

Change in fair value of investments - - 22.6 - 22.6

Change in fair value of derivative financial instruments - - -13.5 - -13.5

Deferred tax on movements in capital and reserves - - 0.7 - 0.7

Balance at 31 December 2004 70.2 - 509.8 - 580.0

Parent company

Balance at 1 January 2003 70.2 300.0 340.1 7.0 717.3

Profit/loss for the year - - 0.8 - 0.8

Declared in dividend - - 0.2 -7.0 -6.8


Foreign exchange adjustment re equity loans etc. - - -11.0 - -11.0

Recognised in capital and reserves in subsidiaries, net - - 5.2 - 5.2

Tax value re price loss on employee shares from 1999 - - 1.8 - 1.8

Change in fair value of derivative financial instruments - - 0.8 - 0.8

Deferred tax on movements in capital and reserves - - 2.5 - 2.5

Balance at 31 December 2003 70.2 300.0 325.6 - 695.8

Profit/loss for the year - - -122.4 - -122.4

Transfer - -300.0 300.0 - -


Foreign exchange adjustment re equity loans etc. - - 13.6 - 13.6

Recognised in capital and reserves in subsidiaries, net - - -2.5 - -2.5

Change in fair value of investments - - 19.1 - 19.1

Change in fair value of derivative financial instruments - - -4.4 - -4.4

Deferred tax on movements in capital and reserves - - -2.4 - -2.4

Balance at 31 December 2004 70.2 - 509.8 - 580.0

Total capital and reserves

Proposed in dividend for the fiscal year

Profit carried forward

Premium on issue

Share capital

See note 17 for a further specification of profit/loss carried forward, p. 67.

External sales Total assets Investments

54

SEGMENT INFORMATION

Primary segments - Business segments amounts in DKKm

2004 2003 2004 2003 2004 2003

Western Europe 1,088.2 997.8 663.2 732.8 53.7 55.2

Central and Eastern Europe 161.1 158.2 281.0 254.2 33.4 16.7

North America 175.9 128.5 324.2 364.0 10.5 132.7

South America 133.0 125.2 149.5 154.4 10.9 6.3

Asia 32.0 24.2 51.9 53.3 2.0 1.6

Others 51.7 90.9 34.2 34.6 1.4 0.4

Total 1,641.9 1,524.8 1,504.0 1,593.3 111.9 212.9

2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003

External sales 940.1 888.2 129.8 124.1 144.3 105.9 17.4 16.2 191.4 157.7 125.2 125.1 93.7 107.6 1,641.9 1,524.8

Internal sales 10.1 18.7 - 0.1 - - - - 0.6 3.2 - - -10.7 -22.0 - -

Revenue 950.2 906.9 129.8 124.2 144.3 105.9 17.4 16.2 192.0 160.9 125.2 125.1 83.0 85.6 1,641.9 1,524.8

Operating profit/loss 94.0 89.4 1.9 -10.7 -162.1 -50.3 -2.7 -2.9 37.5 28.1 5.7 7.1 -42.6 -31.8 -68.3 28.9

Restructuring -50.0 - -50.0 -

Total operating profit/loss (EBIT) -118.3 28.9

Total interest income and expense and similar items -29.1 -29.9 -29.1 -29.9

Tax on profit/loss for the year 24.7 0.4 24.7 0.4

Share in profit for the year to minorities 0.3 1.4 0.3 1.4

Share in profit/loss for the year to Group -122.4 0.8

Intangible fixed assets 14.9 17.7 - - - 60.5 - - - - - - - 10.1 14.9 88.3

Property, plant and equipment 430.0 430.3 84.4 84.8 218.8 227.8 14.9 18.8 79.6 67.9 47.9 49.9 51.2 81.2 926.8 960.7

Other long-term assets - - - - - - - - - - - - 92.6 46.8 92.6 46.8

Short-term assets (less cash at bank and in hand) 259.0 240.1 36.2 58.4 34.7 76.1 5.9 5.7 53.4 42.8 27.8 23.5 4.2 -16.4 421.2 430.2

Cash at bank and in hand 21.6 36.9 1.5 11.2 8.6 0.1 - - 0.6 0.5 4.9 5.5 11.3 13.1 48.5 67.3

Total assets 725.5 725.0 122.1 154.4 262.1 364.5 20.8 24.5 133.6 111.2 80.6 78.9 159.3 134.8 1,504.0 1,593.3

Interest-bearing debt 37.9 17.6 36.0 4.3 - 3.2 3.6 2.8 0.1 2.8 14.3 15.3 447.8 478.9 539.7 524.9

Non-interest-bearing debt 148.8 133.6 15.6 60.7 23.0 274.2 3.7 4.2 16.0 6.3 15.1 20.2 149.3 -140.0 371.5 359.2

Capital and reserves and minorities - - - - - - - - - - - - 592.8 709.2 592.8 709.2

Total liabilities 186.7 151.2 51.6 65.0 23.0 277.4 7.3 7.0 16.1 9.1 29.4 35.5 1,189.9 1,048.1 1,504.0 1,593.3

Investments intangible fixed assets - 1.0 - - - 0.8 - - - - - - 0.8 3.3 0.8 5.1

Investments property, plant and equipment 65.6 44.9 10.9 6.3 11.7 131.9 - 1.5 19.5 5.3 6.1 9.8 -2.7 8.1 111.1 207.8

Total investments 65.6 45.9 10.9 6.3 11.7 132.7 - 1.5 19.5 5.3 6.1 9.8 -1.9 11.4 111.9 212.9

Amortisation and impairment re goodwill and development projects 3.4 2.7 - - 60.7 4.6 - - - - - - 10.5 0.9 74.6 8.2

Depreciation property, plant and equipment 69.7 63.3 9.3 10.1 16.5 2.6 1.8 2.2 9.5 9.8 8.1 8.0 14.3 8.4 129.2 104.4

Total amortisation, impairment

and depreciation 73.1 66.0 9.3 10.1 77.2 7.2 1.8 2.2 9.5 9.8 8.1 8.0 24.8 9.3 203.8 112.6

Cash flows from operating activities 157.4 134.1 7.5 6.4 -81.8 -74.1 -0.5 -0.8 44.5 37.5 17.8 18.0 -70.5 -21.0 74.4 100.1

Average no. of employees 1,218 1,224 429 436 433 226 79 67 235 224 73 72 126 114 2,593 2,363

TotalNot

allocatedSkjern

Papirfabrik A/SIndustrialPackagingEurope South America North America Asia

Egg & Fruit Packaging

Secondary segments – Geographical segments

A breakdown of secondary activities by location of customers and activities

Western Europe Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Poland, Sweden, Switzerland and the UK

Central and Eastern Europe The Baltic Republics, the Czech Republic, Croatia, Hungary, Poland, Russia and others North America Canada and the USA South America Argentina, Brazil and Chile Asia China, Japan, Malaysia, the Philippines and Thailand Others Australia, Israel, New Zealand etc.

55

LIST OF CONTENTS NOTES

Notes - income statement 56 1 Revenue 56

2 Staff costs and treasury shares 56

3 Financial income and expense 58

4 Tax on profit/loss for the year 58

5 Earnings per share (EPS) 59

Notes - cash flow statement 59

6 Adjustments to the cash flow statement 59

7 Changes in working capital 59

Notes - balance sheet 60 8 Write-down of goodwill 60

9 Intangible assets 61

10 Property, plant and equipment 62

11 Investments in subsidiaries 64

12 Receivables from subsidiaries 65

13 Investments in associates 65

14 Other investments 66

15 Inventories 66

16 Contract work in progress 66

17 Capital and reserves 67

18 Minorities 67

19 Pensions, Group 68

20 Deferred tax 69

21 Other provisions 70

22 Government grants 71

23 Short- and long-term obligations 72

24 Restructuring 73

Notes - no reference 73

25 Fee to the auditors elected at the AGM 73

26 Security and contingent liabilities 73

27 Operational leasing 73

28 Derivative financial instruments 74

29 Related parties 74

30 Discontinuing activities 75


Page

56


2004 2003 2004 2003

1. Revenue

The value of goods sold 1.616,3 1.477,7 734,7 667,8

Sales value of production during the year of

contract work in progress 25,6 47,1 48,9 144,3

1.641,9 1.524,8 783,6 812,1

The parent company’s revenue in Denmark totalled DKKm 86.0

(DKKm 84.6 in 2003).

A breakdown of consolidated revenue by geographical markets appears

in the chart of Group segments, cf. page 54.

2. Staff costs and treasury shares

A breakdown of staff costs:

Wages, salaries and remuneration 503.0 441.9 253.2 227.7

Payments to defined benefit pension plans 2.6 1.5 - -

Payments to defined contribution pension plans 36.9 32.2 18.5 16.9

Other social security payments 39.1 37.7 1.5 1.2

Total staff costs 581.6 513.3 273.2 245.8

Recognition of staff costs in the accounts:

Production costs 420.4 373.3 200.7 188.8

Distribution and sales costs 81.1 76.0 23.8 19.3

Administrative expenses 71.1 64.0 40.7 37.7

Restructuring 9.0 - 8.0 -

Total staff costs 581.6 513.3 273.2 245.8

No. of employees

Average no. of full-time employees 2,593 2,363 679 678

ACCOUNTING NOTES

Notes amounts in DKKm

57

2. Staff costs (cont’d)

The amounts stated in wages, salaries and remuneration and pension payments for Group and parent company include DKKm 7.5 to

the Executive Board (DKKm 7.2 in 2003) and DKKm 1.7 in emoluments to the Board of Directors (DKKm 1.3 in 2003).

See note 19 concerning pension obligations.

Treasury shares and incentive schemes

Hartmann’s portfolio of treasury shares is unchanged at 100,000 B shares representing a total nominal value of DKKm 2, or 2.85%

of the total share capital. The market value of the shares at 31 December 2004 stood at DKKm 12.0, down from DKKm 13.0 at

31 December 2003.

The shares were acquired in cover of commitments under an option scheme launched in July 2002 and involving the Executive Board

and a number of senior employees.

No options have been allocated to the Board of Directors.

The option scheme is not conditional upon continued employment with the Hartmann Group.

If employment ceases before an option is exercised, the option will be reduced proportionally.

The option scheme is exercisable not earlier than two years, and not later than five years, after the allocation.

The theoretical market value of the option scheme at 31 December 2004 was calculated on the basis of the Black-Scholes model.

The calculation presupposes a volatility of 29% and a risk-free interest rate computed at 4.0%.

The estimated value is DKKm 0.9 (DKKm 0.8 in 2003), provided that the options are exercised at the latest possible time.

Share options

Executive Board

Exercise price 120 1 July 2002 2-5 years 25,000

Exercised -

Outstanding 25,000

Senior employees

Exercise price 120 1 July 2002 2-5 years 10,700

Exercised -

Outstanding 10,700

Total outstanding 35,700

No. of sharesExercise period

from date of issueDate of issue

ACCOUNTING NOTES


58


2004 2003 2004 2003

3. Financial income and expense

Financial income

Financial income from other investments (dividend) 0.8 0.7 0.8 0.7

Interest income, subsidiaries - - 7.1 8.2

Foreign exchange gain (net) - - 0.3 -

Other interest income 3.0 3.7 0.4 0.9

Total financial income 3.8 4.4 8.6 9.8

Financial expense

Interest expense, subsidiaries - - 2.0 1.3

Foreign exchange loss (net) 3.1 4.0 - 8.9

Interest expense, long-term debt 21.1 20.4 20.0 18.3

Other interest expense 8.9 10.1 4.2 3.4

Total financial expense 33.1 34.5 26.2 31.9

Financial income and expense -29.3 -30.1 -17.6 -22.1

4. Tax on profit/loss for the year

Current tax 22.5 21.3 1.8 0.2

Changes in deferred tax -46.5 -21.2 -25.0 6.6

Tax re previous years -0.7 -0.5 -5.8 1.3

Tax on profit/loss for the year -24.7 -0.4 -29.0 8.1

A breakdown of tax on profit/loss for the year:

Profit/loss for the year before tax -147.4 -1.0 -151.4 8.9

Profit/loss after tax in subsidiaries - - 86.6 -0.7

Profit/loss after tax in associates -0.2 -0.2 -0.2 -0.2

-147.6 -1.2 -65.0 8.0

30% in tax thereon -44.2 -0.4 -19.5 2.4

Adjustment of tax calculated for foreign subsidiaries in relation to 30% -12.2 -5.1 - -

The tax effect of:

Non-deductible goodwill amortisation and impairment 11.1 0.5 0.5 0.5

Adjustment re co-taxation - - 1.9 3.1

Unrecognised deferred tax assets in foreign subsidiaries 29.6 2.0 - -

Non-taxable income and non-deductible expense -3.4 3.1 0.7 0.8

Other -4.9 - -6.8 -

Tax re previous years -0.7 -0.5 -5.8 1.3

-24.7 -0.4 -29.0 8.1

Effective tax rate 17% 33% 45% 101%

ACCOUNTING NOTES


59


2004 2003 2004 2003

5. Earnings per share

Share in profit/loss for the year to Group -122.4 0.8

Average no. of shares 3,507,545 3,507,545

Average no. of treasury shares -100,000 -100,000

Average no. of shares in circulation 3,407,545 3,407,545

Average dilution effect of non-exercised share options 151 3,489

Average no. of shares, diluted 3,407,696 3,411,034

Earnings per share in DKK, cf. IAS 33, on the basis of the share

in the profit/loss for the year to Group (EPS) -35.9 0.2

Earnings per share in DKK, diluted, cf. IAS 33, on the basis

of the share in the profit/loss for the year to Group (EPS) -35.9 0.2

6. Adjustments to the cash flow statement

Depreciation and impairment and profit/loss on disposal of long-term assets 204.9 109.0 65.8 39.8

Share in profit/loss after tax in subsidiaries - - 86.6 -0.7

Share in profit/loss after tax in associates -0.2 -0.2 -0.2 -0.2

Financial income from other investments (dividend) -0.8 -0.7 -0.8 -0.7

Financial income -3.0 -3.7 -7.8 -9.1

Financial expense 33.1 34.5 26.2 31.9

Tax on profit/loss for the year -24.7 -0.4 -29.0 8.1

Other provisions 8.3 -8.5 14.8 -0.2

Total adjustments 217.6 130.0 155.6 68.9

7. Changes in working capital

Changes in receivables -2.7 -1.5 27.8 19.5

Changes in inventories 0.5 1.4 0.6 48.2

Changes in trade payables etc. 34.7 11.0 66.0 88.4

Total changes in working capital 32.5 10.9 94.4 156.1

ACCOUNTING NOTES


60

8. Goodwill write-down

On 31 December 2004 the Management performed an impairment test for the carrying amount of goodwill.

For the purpose of the test the carrying amount of goodwill at 31 December 2004 was distributed on the cash flow-generating entities:

Egg & Fruit Packaging Europe and Egg & Fruit Packaging North America, resulting in the breakdown below (before write-down)

DKKm

Egg & Fruit Packaging Europe 10.7

Egg & Fruit Packaging North America 55.8

Total goodwill before write-down 66,5

Egg & Fruit Packaging Europe

The Management estimates that, based on the outlook for future net cash flows, the carrying amount of goodwill is not likely to

exceed the recoverable amount.

The recoverable amount builds upon the value in use, which was determined by using expected net cash flows as reflected in approved

budgets and forecasts for the period 2005-2009 and by using a discount rate before tax which takes account of the specific risks char-

acteristics of the European market.

Egg & Fruit Packaging North America

The recent developments of the USD/CAD rate have an adverse effect on earnings in North America. Since the investment was

decided, USD has lost approx. 25% against the exchange rates used in the original calculations. As previously announced it was

originally expected that earnings, when the plant was completely run in, would generate a yearly profit of approx. DDKm 40.

The present USD/CAD rate level will cause the operating profit in itself to be reduced by approx. DKKm 30.

This is the main reason why the Management believes that the carrying amount at 31 December 2004 will exceed the recoverable

amount in an amount corresponding to the entire amount in capitalised goodwill, DKKm 55.8.

The recoverable amount builds upon the value in use, which is determined by using expected net cash flows as reflected in budgets and

forecasts for the period 2005-2009 and by using a discount rate before tax of 8%.

The weighted average growth rate used in an extrapolation of expected future net cash flows for the years after 2009 is estimated at

1.5%. Moreover, the USD/CAD rate is kept at the level prevailing at year-end 2004 and does not recognise the possible positive effects

of e.g. price increases and other optimisation possibilities.

The write-down of DKKm 55.8 is recognised in the income statement under ’Goodwill amortisation and impairment’.

ACCOUNTING NOTES


61

9. Intangible fixed assets

Group

Acquisition cost at 1 January 2004 19.1 131.3 150.4

Foreign exchange adjustment - -0.4 -0.4

Additions 0.8 - 0.8

Disposals -13.3 -108.1 -121.4

Acquisition cost at 31 December 2004 6.6 22.8 29.4

Depreciation and amortisation at 1 January 2004 3.4 58.7 62.1

Foreign exchange adjustment - -0.8 -0.8

Depreciation 1.8 6.5 8.3

Impairment 10.5 55.8 66.3

Disposals -13.3 -108.1 -121.4

Depreciation and amortisation at 31 December 2004 2.4 12.1 14.5

Carrying amount at 31 December 2004 4.2 10.7 14.9


Depreciation on development projects is recognised in the income statement under production costs. DKKm 10.5 in disposals for the year re development projects have been recognised in the income statement under ’Restructuring’, cf. note 24.

It is not possible to allocate goodwill amortisation and impairment in order for the amount to be included in the other items of the income statement. Consequently, goodwill amortisation and impairment are recognised as a separate item in the income statement. See note 8 for details on goodwill write-downs for the year.

In 2004 development costs totalled DKKm 9.6 (DKKm 9.0 in 2003) of which DKKm 0.8 (DKKm 4.3 in 2003) is recognised in the balance sheet, and DKKm 8.8 (DKKm 4.7 in 2003) is recognised in the income statement under production costs.

Parent company

Acquisition cost at 1 January 2004 19.1 64.6 83.7

Additions 0.8 - 0.8

Disposals -13.3 -41.8 -55.1

Acquisition cost at 31 December 2004 6.6 22.8 29.4

Depreciation and amortisation at 1 January 2004 3.4 52.4 55.8

Depreciation 1.8 1.5 3.3

Impairment 10.5 - 10.5

Disposals -13.3 -41.8 -55.1

Depreciation and amortisation at 31 December 2004 2.4 12.1 14.5



Depreciation on development projects is recognised in the income statement under production costs. DKKm 10.5 in disposals for the year re development projects have been recognised in the income statement under ’Restructuring’, cf. note 24.

It is not possible to allocate goodwill amortisation and impairment in order for the amount to be included in the other items of the income statement. Consequently, goodwill amortisation and impairment are recognised as a separate item in the income statement. See note 8 for details on goodwill write-downs for the year.

In 2004 development costs totalled DKKm 7.1 (DKKm 7.0 in 2003) of which DKKm 0.8 (DKKm 4.3 in 2003) is recognised in the balance sheet, and DKKm 6.3 (DKKm 2.7 in 2003) is recognised in the income statement under production costs.

TotalDevelopment

projects Goodwill

TotalDevelopment

projects Goodwill

ACCOUNTING NOTES


62


10. Property, plant and equipment

Group

Acquisition cost at 1 January 2004 418.4 1.495.4 172.4 21.0 2,107.2

Foreign exchange adjustment -1.4 -3.8 -0.6 0.0 -5.8

Carryforward - 21.8 - -21.8 -

Additions 5.2 64.9 10.7 30.3 111.1

Disposals -3.1 -20.6 -26.1 - -49.8

Acquisition cost at 31 December 2004 419.1 1,557.7 156.4 29.5 2,162.7

Depreciation and impairment at 1 January 2004 163.5 843.4 139.6 - 1.146.5

Foreign exchange adjustment -0.1 0.7 -0.5 - 0.1

Depreciation 12.3 91.8 11.1 - 115.2

Impairment 2.7 9.1 2.2 - 14.0

Disposals -2.8 -14.6 -22.5 - -39.9

Depreciation and impairment at 31 December 2004 176.6 930.4 129.9 - 1,235.9

Carrying amount at 31 December 2004 243.5 627.3 26.5 29.5 926.8


Of the amount in disposals for the year under property, plant and equipment DKKm 14.0 is recognised in the income statement under

’Restructuring’, cf. note 24.

The public land assessment of Danish properties at 1 January 2004 came to DKKm 146.3 (DKKm 140.2 in 2003). The carrying amount of

Danish properties at 31 December 2004 stood at DKKm 114.1 (DKKm 120.4 in 2003).

Parent company

Acquisition cost at 1 January 2004 215.6 673.5 109.8 10.9 1,009.8

Carryforward - 11.7 - -11.7 -

Additions 1.5 9.9 2.4 26.2 40.0

Disposals -2.8 -13.3 -18.4 - -34.5

Acquisition cost at 31 December 2004 241.3 681.8 93.8 25.4 1,015.3

Depreciation and impairment at 1 January 2004 107.4 464.7 96.9 - 669.0

Depreciation 4.6 30.6 5.2 - 40.4

Impairment 2.7 9.1 2.2 - 14.0

Disposals -2.8 -13.1 -18.2 - -34.1

Depreciation and impairment at 31 December 2004 111.9 491.3 86.1 - 689.3



Of the amount in disposals for the year under property, plant and equipment DKKm 14.0 is recognised in the income statement under

’Restructuring’, cf. note 24.

The public land assessment of Danish properties at 1 January 2004 came to DKKm 132.4 (DKKm 127.1 in 2003). The carrying amount of

Danish properties at 31 December 2004 stood at DKKm 102.4 (DKKm 108.2 in 2003).

TotalProduction plant

under constructionOther

operating assetsTechnical plant and machinery

Land and buildings

TotalProduction plant

under constructionOther

operating assetsTechnical plant and machinery

Land and buildings

ACCOUNTING NOTES

63



2004 2003 2004 2003

10. Property, plant and equipment (cont’d)

A breakdown of depreciation:

Depreciation for the year 115.2 104.4 40.4 40.2

Part of government grant recognised as income -2.2 -2.2 -1.1 -1.2

Total depreciation 113.0 102.2 39.3 39.0

Depreciation for the year is recognised in the income

statement under the following items:

Production costs 106.6 93.1 36.8 34.9

Distribution and sales costs 2.6 3.1 0.2 0.3

Administrative expenses 3.8 6.0 2.3 3.8

Total depreciation 113.0 102.2 39.3 39.0

ACCOUNTING NOTES

64


11. Investments in subsidiaries

Skjern Papirfabrik A/S Denmark 2,000 DKK 100% 43.7 43.5

Hartmann Verpackung Ges.mbH (being wound up) Austria 36 EUR 100% 0.3 1.9

Hartmann (UK) Ltd. UK 75 GBP 100% 4.0 2.2

Hartmann Belgium N.V./S.A. (being wound up) Belgium 62 EUR 100% 0.0 1.5

Hartmann France S.a.r.l. France 112 EUR 100% 2.4 3.3

Hartmann Verpackung AG Switzerland 100 CHF 100% 2.5 2.2

Hartmann Italiana S.r.l. (being wound up) Italy 215 EUR 100% 0.0 0.2

Hartmann-Schwedt GmbH Germany 3,068 EUR 100% 57.4 43.4

(Subsidiary: Hartmann Verpackung GmbH) Germany 100%

Hartmann Hungary LLC Hungary 786,870 HUF 100% 134.7 96.0

Hartmann Pólska Sp. z o.o. Poland 50 PLN 100% 0.0 0.1

Hartmann CZ s.r.o. (being wound up) Czech Rep. 1,000 CZK 100% 0.0 0.1

Brødrene Hartmann Invest ApS Denmark 2,000 DKK 100% 32.4 31.1

(Subsidiary: Hartmann-PPM Argentina S.R.L.) Argentina 85%

Hartmann Embalagens do Brasil Ltda. Brazil 30,239 BRL 85% 42.5 58.2

Hartmann Holdings (S) Pte. Ltd. Singapore 25,000 SGD 100% 49.2 51.7

Hartmann Malaysia Sdn. Bhd. Malaysia 34,656 MYR 100% 38.5 39.5

Hartmann papirna ambalaža d.o.o. Croatia 53,728 HRK 100% 91.0 83.7

Hartmann-Mai Ltd. Israel 2 ILS 100% 19.8 15.3

Hartmann-Varkaus Oy Finland 841 EUR 100% 33.9 34.7

Hartmann Vilnius (being wound up) Lithuania 10 LTL 100% 0.0 0.0

H-Novi SAD Serbia 5 EUR 100% 0.0 -

Nihon Hartmann K.K. Japan 35,000 JPY 100% 0.0 0.0

Hartmann Canada Inc. Canada 83,950 CAD 100% 273.1 84.6

(Subsidiary: Hartmann Dominion Inc.) Canada 100%

(Subsidiary: Hartmann USA Inc.) USA 100%

825.4 593.2

Intra-group profit -51.8 -47.7

Deferred tax thereon 15.5 14.3

Carrying amount at 31 December 789.1 559.8

A specification of changes during the year:

Acquisition cost at 1 January 2004 812.5 677.5

Capital increases 353.0 135.0

Acquisition cost at 31 December 1,165.5 812.5

Revaluation at 1 January -252.7 -223.1

Profit before tax 99.2 92.3

Loss before tax -175.9 -77.1

Changes in intra-group profit -5.2 -22.0

Tax on profit/loss for the year -6.9 0.9

Tax on change in intra-group profit 2.2 -86.6 6.6

Dividend -22.1 -21.5

Foreign exchange adjustment -16.8 -14.8

Other revaluations 1.8 6.0

Revaluation at 31 December -376.4 -252.7


Carrying amount 31 Dec. 2003

Carrying amount 31 Dec. 2004Ownership

Nominal capital (in ’000)

Registered office in

ACCOUNTING NOTES

65



2004 2003 2004 2003

12. Receivables from subsidiaries

Carrying amount at 1 January 311.2 125.5

Foreign exchange adjustment 7.6 -13.9

Additions 1.2 215.6

Disposals -240.9 -16,0


Of this amount, DKKm 69.5 relates to financial leasing (DKKm 77.1 in 2003)

A breakdown of the gross amount in receivables from financial leasing:

Due within 1 year 10.6 10.6

Due within 1 to 5 years 67.2 63.4

Due after 5 years - 14.5

Total gross amount in receivables 77.8 88.5

Not earned, future interest income -8.3 -11,4

Net investment in financial leasing 69.5 77.1

A breakdown of net investment in financial leasing:

Due within 1 year 8.0 7.6

Due within 1 to 5 years 61.5 55.3

Due after 5 years - 14.2

Net investment in financial leasing 69.5 77.1

Financial leasing covers 4 leasing contracts for production equipment manufactured by Hartmann Technology and installed in a foreign subsidiary.

13. Investments in associates

DanFiber A/S, Søborg, nom. value DKK 334,000, 33.4% stake

Acquisition cost at 1 January 0.3 0.3 0.3 0.3

Acquisition cost at 31 December 0.3 0.3 0.3 0.3

Revaluation at 1 January 3.5 3.4 3.5 3.4

Dividend -0.2 -0.1 -0.2 -0.1

Profit before tax 0.3 0.3 0.3 0.3

Tax on profit/loss for the year -0.1 -0.1 -0.1 -0.1

Revaluation at 31 December 3.5 3.5 3.5 3.5

Carrying amount at 31 December 3.8 3.8 3.8 3.8

ACCOUNTING NOTES

66


Carrying amount at 31 DecemberRevaluation

Carrying amount at 1 January Ownership

14. Other investments

Group

Celulosas Moldeadas Hartmann S.A.,

"CEMOSA", Spain, nom. 768,532 EUR 18.4% 10,7 19.1 29.8

Colombiana de Moldeados S.A.,

"COMOLSA", Colombia, nom. 4,774,000 COP 1.1% - - -

Duales System Deutschland AG 0.2% 0.0 3.5 3.5

Carrying amount 31 December 2004 10.7 22.6 33.3

Carrying amount 31 December 2003 10.7 - 10.7

Change in fair value of DKKm 22.6 is recognised in capital and reserves.

Parent company

Celulosas Moldeadas Hartmann S.A.,

"CEMOSA", Spain, nom. 768,532 EUR 18.4% 10.7 19.1 29.8

Colombiana de Moldeados S.A.,

"COMOLSA", Colombia, nom. 4,774,000 COP 1.1% - - -

Carrying amount 31 December 2004 10.7 19.1 29.8

Carrying amount 31 December 2003 10.7 - 10.7

Change in fair value of DKKm 19.1 is recognised in capital and reserves.


2004 2003 2004 2003

15. Inventories

Raw materials and consumables 51.7 48.2 25.9 22.9

Work in progress 9.0 5.4 1.3 2.2

Finished goods and goods for resale 51.7 60.4 18.8 21.5

Inventories at 31 December 112.4 114.0 46.0 46.6

Inventories recognised at net realisation value 1.5 1.4 1.5 1.4

The Group put up DKKm 3.7 in inventories as security for debt items.

The parent company did not put up any security.

16. Contract work in progress

Contract work in progress 0.0 7.3 1.2 7.6

Invoiced on account -4.9 -11.1 -4.9 -11.1

-4.9 -3.8 -3.7 -3.5

to be recognised as follows:

Contract work in progress 0.0 1.1 1.2 1.4

Prepayments from customers -4.9 -4.9 -4.9 -4.9

-4,9 -3,8 -3,7 -3,5

ACCOUNTING NOTES

67


Group 2004 2003

18. Minorities

Carrying amount at 1 January 13.4 14.0

Share in profit/loss for the year -0.3 -1.4

Foreign exchange adjustment -0.3 0.8

Minorities at 31 December 12.8 13.4

ACCOUNTING NOTES

2004 2003

17. Capital and reserves

A breakdown of the share capital:

A shares 1 unit of DKK 5,000,000 5.0 5.0

1 unit of DKK 1,400,000 1.4 1.4

AA shares 1 unit of DKK 2,133,000 2.2 2.2

B shares 3,080,895 units of DKK 20 61.6 61.6

Share capital at 31 December 70.2 70.2

A breakdown of profit/loss carried forward:

Carrying amount at 1 January 2003 -4.1 -224.5 - 568.7 340.1

Additions 8.3 - - 2.0 10.3

Disposals -2.3 - - - -2.3

Changes during the year - -23.3 - 0.8 -22.5

Carrying amount at 31 December 2003 1.9 -247.8 - 571.5 325.6

Additions -0.5 - 22.6 - 22.1

Transferred from ’Premium on issue’ - - - 300.0 300.0

Disposals -8.6 - - - -8.6

Changes during the year - -6.9 - -122.4 -129.3

Carrying amount at 31 December 2004 -7.2 -254.7 22.6 771.7 509.8

Total Profit/loss

carried forwardReserve for foreign

exchange adjustmentReserve re

hedging instrumentsChange in fair valueof other investments

68


19. Pensions, Group

Defined contribution plans

Hartmann runs pension schemes which cover certain groups of employees in Denmark and abroad. As a main rule, pension schemes take

the form of defined contribution plans. Hartmann arranges for the regular payment (e.g. a fixed amount or a fixed percentage of the salary)

of premiums to independent insurers, who are responsible for the pension obligations. Once it has effected payment of the contribution

under a defined contribution plan, Hartmann has no further pension obligation in relation to employees or former employees.

Defined benefit plans

Under defined benefit plans, Hartmann is obligated to pay a specific benefit (e.g. an old pension as a fixed proportion of the exit salary).

Under defined benefit plans, Hartmann bears the risk in relation to future interest rate developments, inflation, mortality rates etc. and

so, in the event of a change in the assumptions for the computations, the actuarial value in use will change.

In the event of changes in benefits relating to former employees, the changed value in use will be categorised as a historical cost to be

recognised immediately.

Pension provisions in the balance sheet relate to uncovered schemes in Germany. Furthermore, defined benefit plans exist in Canada, but

at 31 December 2004 no net obligations.

The table below shows the actuarial assumptions used in the computation of pension provisions.

2004 2003

Discount rate 4.5% 5.3%

Future salary increases 3.0% 3.0%

Future pension increases 1.3% 1.8%

The amounts recognised in the balance sheet appear as follows:

Net present value of financed obligations 20.6 19.8

Fair value of assets -3.2 -3.6

Obligation at 31 December 17.4 16.2

A specification of movements in the obligation recognised:

Obligation at 1 January 16.2 16.8

Foreign exchange adjustment 0.2 0.0

Recognised during the year 2.6 1.5

Paid during the year -1.6 -2.1

Obligation at 31 December 17.4 16.2

The majority of pensions falls due more than 12 months after the balance sheet date.

Group

ACCOUNTING NOTES

69


2004 2003 2004 2003

20. Deferred tax

Deferred tax at 1 January 34.7 55.2 56.3 50.8

Foreign exchange adjustment 0.9 0.7 - -

Deferred tax for the year recognised in profit/loss for the year -46.5 -21.2 -25.0 6.6

Deferred tax re foreign exchange adjustment recognised in

capital and reserves 3.6 -2.5 3.6 -3.3

Deferred tax re hedging instruments recognised in capital and reserves -4.3 4.4 -1.2 0.8

Adjustment of deferred tax re previous years -4.5 -1.9 -5.8 1.4

Deferred tax at 31 December -16.1 34.7 27.9 56.3

A breakdown of deferred tax:

Intangible fixed assets -2.4 3.8 1.9 3.8

Property, plant and equipment 34.7 56.7 44.4 51.4

Short-term assets 0.2 3.2 1.6 2.1

Provisions -10.5 -3.3 -7.3 -5.1

Others 3.9 2.5 3.2 4.1

Tax loss carryforward -9.8 -28.2 -15.9 -

Deferred tax at 31 December 16.1 34.7 27.9 56.3

Deferred tax will be recognised in the following

accounting items:

Other long-term assets -55.5 -32.3 - -

Long-term obligations 39.4 67.0 27.9 56.3

-16.1 34.7 27.9 56.3

Deferred tax assets not recognised

Value of tax loss not recognised 44.0 14.4 - -

Recognition is not made of deferred tax for such part of the Group’s total tax loss carryforwards as is not likely to be realised or which, in

some other way, is affected by major risks of not being realised. An important part of this amount is related to Hartmann North America

and Hartmann Brazil.


ACCOUNTING NOTES

70



2004 2003 2004 2003

21. Other provisions

Guarantees at 1 January 2004 0.7 0.9 0.7 0.9

Foreign exchange adjustment - - - -

Additions 1.2 0.4 1.2 0.4

Disposals -0.6 -0.6 -0.6 -0.6

Guarantees at 31 December 1.3 0.7 1.3 0.7

Restructuring provisions at 1 January 2004 7.5 8.7 - -

Adjustment re opening balance re purchase of subsidiary - 7.0 - -

Foreign exchange adjustment 0.0 0.1 - -

Additions 25.5 - 24.5 -

Disposals -17.8 -8.3 -10.3 -

Restructuring provisions at 31 December 15.2 7.5 14.2 -

Other provisions at 31 December 16.5 8.2 15.5 0.7

Guarantees

Provisions have been made for guarantees covering contract-related warranty complaints for goods and services already delivered

by Hartmann Technology.

Restructuring etc.

In fiscal 2004 the leased premises relating to Hartmann Dominion Inc. were vacated. The restructuring provisions related

to clearing and removal were spent during the fiscal year.

In 2004, Hartmann launched a Focus Plan with the aim of securing an annual improvement in operating result of DKKm 30

already in 2005.

The Focus Plan consists of three elements:

• The closure of the business area for food packaging (dualpack)

• A reduction of fixed costs in Egg & Fruit Packaging Europe

• The divestment of Skjern Papirfabrik A/S

At 31 December 2004 totally DKKm 10.3 of the restructuring provisions have been used.

ACCOUNTING NOTES

71


2004 2004

22. Government grants

Government grants at 1 January 34.8 19.7

Foreign exchange adjustment 0.0 -

Additions - -

Government grants at 31 December 34.8 19.7

Recognised in the income statement at 1 January 17.0 8.5

Foreign exchange adjustment 0.1 -

Recognised in the income statement during the year 2.2 1.1

Recognised at 31 December 19.3 9.6


Recognised as short-term payables thereof 2.2 1.1

Recognised as long-term payables thereof 13.3 9.0

Carrying amount at 31 December 2003 17.8 11.2

Parent company

Brødrene Hartmann A/S regularly receives government grants for development-related and energy-saving projects. In 1995 the Group

received a major amount towards the construction of the CHP plant in Tønder. There are currently no repayment obligations linked to

the subsidies.

Group

In addition to the government grants to the parent company, the Hartmann Group also received government grants for a production

company in Germany.

Special repayment conditions apply in the event that the assets eligible for grants are not used in accordance with the eligibility criteria.

According to a general rule, eligible assets must be used for a period of between 3 and 5 years from the time the eligible investment

became operational.

In the event that eligible assets are not used in accordance with the eligibility criteria, there is a repayment clause totalling

DKKm 6.1 (DKKm 6.1 in 2003). The Group expects to be able to meet the eligibility criteria.


ACCOUNTING NOTES

72

Due within 1 yearTotal amount due

after 1 yearDue after 5 yearsDue within 1 to 5 years

23. Short- and long-term financial liabilities

Group

Mortgage banks, fixed interest at between 3.7 - 6.9% 28.9 29.8 58.7 6.0

Banks, fixed interest at between 3.4 - 8.9% * 243.5 130.0 373.5 24.4

Banks, floating interest 1.6 3.6 5.2 -

Other debt (interest swap) 0.8 13.3 14.1 -

Government grants 7.7 5.6 13.3 2.2

Carrying amount at 31 December 2004 282.5 182.3 464.8 32.6


* Includes a floating-interest loan of DKKm 100.0 secured on a fixed-rate interest swap.

A breakdown of long-term financial liabilities on currencies: EUR 149.0 18.1

DKK 175.2 14.1

CAD 135.4 -

Others 5.2 0.4

464.8 32.6

Parent company

Mortgage banks, fixed interest at 3.7% 20.9 17.8 38.7 3.8

Banks, fixed interest at between 3.7 - 8.9% * 239.9 129.5 369.4 23.1

Other debt (interest swap) 0.8 13.3 14.1 -

Government grants 3.4 5.6 9.0 1.1



* Includes a floating-interest loan of DKKm 100.0 secured on a fixed-rate interest swap.

A breakdown of long-term financial liabilities on currencies: EUR 133.9 14.9

DKK 161.9 13.1

CAD 135.4 -

431.2 28.0


ACCOUNTING NOTES

73



ACCOUNTING NOTES

2004 2003 2004 2003

24. Restructuring

Breakdown of restructuring costs:

Write-down and impairment of intangible assets 10.5 - 10.5 -

Write-down and impairment of property, plant and equipment 14.0 - 14.0 -

Wages, salaries and similar payments 9.0 - 8.0 -

Other costs 16.5 - 16.5 -

Total restructuring costs 50.0 - 49.0 -

Restructuring costs deriving from the Focus Plan relate to the closure of the business area for food packaging (dualpack), the reduction

of fixed costs in Egg & Fruit Packaging Europe and the divestment of Skjern Papirfabrik A/S.

25. Fee to the auditors elected at the AGM

Statutory audit:

KPMG 3.0 3.1 1.0 1.0

Grant Thornton 0.2 0.2 0.1 0.1

3.2 3.3 1.1 1.1

Other services:

KPMG 1.5 1.7 1.2 1.7

Grant Thornton 0.1 0.1 - -

1.6 1.8 1.2 1.7

Total fee 4.8 5.1 2.3 2.8

26. Provision of security and contingent liabilities

The Group is party to a few court cases, some of which are in Brazil and involve tax issues. In the opinion of the Management, the

pending cases will not materially affect the financial position of Group and parent company. This situation is unchanged from last year.

The parent company provided security in an amount of DKKm 14.9 (DKKm 16.5 in 2003) for the debt of subsidiaries and DKKm 5.0

(DKKm 0.0 in 2003) in guarantees in relation to a third party.

The parent company is jointly and severally liable with the other Danish co-taxed companies for tax on the co-taxed income.

27. Operational leasing

Rental and leasing commitments (operational)

Due within 1 year 8.0 6.9 1.6 2.0

Due between 1 and 5 years 17.5 18.9 1.8 1.9

Due after 5 years - 1.0 - -

Total rental and leasing commitments 25.5 26.8 3.4 3.9

Rental and leasing cost for the year (operational) 6.9 6.3 2.0 1.0

74

28. Derivative financial instruments

At 31 December 2004 the Group had arranged open-ended forward contracts with a term of 3-12 months.

Three interest swaps have a term to maturity of 5-7 years.

The fair value of forward contracts (net) came to DKKm 4.0 (DKKm 13.0 in 2003), and the fair value of the interest swaps

represented a value of DKKm -14.1 (DKKm -9.5 in 2003).

In accordance with the Group’s accounting policies, the fair value is recognised in receivables and payables and capital and reserves

at 31 December 2004 and is recognised in the income statement upon the realisation of the hedged item.

Forward contracts:

GBP/DKK -2.1 0.5 1.8 GBP 18.9 10.76 Jan-Mar 2005

USD/CAD 11.8 1.3 16.8 USD 91.9 1.23 Jan-Dec 2005

CAD/EUR - 3.1 16.0 CAD 72.2 1.58 March 2005

PLN/DKK - -0.4 10.8 PLN 19.7 1.75 Jan-Dec 2005

PLN/HUF - -0.5 15.6 PLN 28.5 59.90 Jan-Dec 2005

Total forward contracts 9.7 4.0 231.2

Interest swaps:

CAD/CAD - -0.8 - CAD 8.0 - Sep 2009

CAD/CAD - -1.3 - CAD 22.0 - Jan 2012

DKK/DKK - -12.0 - DKK 100.0 - Sep 2011

Total interest swaps - -14.1

29. Related parties

Group

The related parties of the Hartmann Group consist of members of the Group’s Board of Directors and Executive Board, major share-

holders of the parent company Brødrene Hartmann A/S and the Group’s associate.

The Hartmann Group has been engaging in the following important transactions with related parties:

Purchases of recycled paper etc. from DanFiber A/S (associate) at a total of DKKm 40.1 in 2004 (DKK 48.5 in 2003).

There have been no important transactions with other related parties. For information on emoluments to members of the Executive

Board and the Board of Directors, see note 2.

Related parties with a controlling influence:

The Brødrene Hartmann Foundation, Klampenborgvej 203, DK-2800 Kgs. Lyngby holds 20.0%, representing 61.8% of the voting stock,

of Brødrene Hartmann A/S. Brødrene Hartmann A/S and the Brødrene Hartmann Foundation have signed a contract for rent and

administration contributing an annual amount of DKKm 0.3 to the Group.


Realised loss/gain recognised in the

income statement in 2004

Unrealised loss/gain from adjustment to

fair value at 31 December 2004

Forward exchange contract at 31

December 2004 Currency

Equivalent value at balance

sheet dateAverage rate

per unit Periods when due

ACCOUNTING NOTES

75


2004 2003 2004 2003

30. Discontinuing activities

Revenue 137.5 129.8 12.3 4.7

Gross profit/loss 18.6 21.2 -10.0 -8.8

Other costs -27.2 -29.6 -4.3 -6.7

Restructuring -25.8 - -25.8 -

Operating result (EBIT) -34.4 -8.4 -40.1 -15.5

Interest income and expense and similar items -1.0 -1.1 - -

Tax on profit/loss for the year 10.3 3.1 12.0 4.7

Profit/loss for the year -25,1 -6.4 -28.1 -10.8

Write-downs at fair value 22.1 - 22.1 -

Tax effect of write-downs -6.6 - -6.6 -

Revaluation after tax 15.5 - 15.5 -

Cash flows from operating activities -4.5 9.9 -15.4 -12.8

Cash flows from investment activities -8.2 -14.6 -2.1 -5.8

Cash flows from financing activities -5.4 -9.7 - -

Total cash flows -18.1 -14.4 -17.5 -18.6

Property, plant and equipment 47.9 78.1 - 28.2

Short-term assets 35.6 31.5 2.9 2.5

Total assets 83.5 109.6 2.9 30.7

Banks 14.3 15.3 - -

Deferred tax obligation 7.4 7.5 - -

Other obligations 17.1 14.8 1.9 2.1

Total obligations 38.8 37.6 1.9 2.1

Discontinuing activities include the business areas that Brødrene Hartmann A/S will divest and close down as part of the Focus Plan.

The note contains information on Skjern Papirfabrik A/S and the business area for food packaging (dualpack).


ACCOUNTING NOTES

76

amounts in DKKm

Development in financial highlights and key figures per quarter

2004 2003

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

(unaud.) (unaud.) (unaud.) (unaud.) (aud.) (unaud.) (unaud.) (unaud.) (uuaud.) (aud.)

Income statement

Revenue 433 385 390 434 1,642 376 344 376 429 1,525

Operating profit before depreciation (EBITDA) 25 15 7 37 84 43 20 34 46 143

Operating result before goodwill amortisation and impairment (EBITA) -4 -15 -46 9 -56 17 -3 8 13 35

Goodwill amortisation and impairment -2 -2 -2 -57 -62 -1 -1 -2 -2 -6

Operating result (EBIT) -5 -17 -47 -49 -118 16 -4 6 11 29

Interest income and expense and similar items -7 -8 -7 -7 -29 -8 -4 -10 -8 -30

Profit/loss before tax (EBT) -12 -25 -55 -56 -147 8 -9 -4 4 -1

Share in profit/loss for the year to Group (EAT) -8 -14 -45 -56 -122 6 -6 -3 3 1

Cash flows

Cash flows from operating activities -12 -14 32 68 74 7 33 -5 64 100

Cash flows from investment activities -18 -26 -29 -33 -107 -55 -78 -47 -21 -201

Cash flows from financing activities -9 -4 74 -6 55 -9 92 -2 -6 75

Total cash flows -39 -44 77 29 23 -56 48 -54 36 -26

Balance

Assets 1,647 1,587 1,555 1,504 1,504 1,512 1,533 1,618 1,593 1,593

Capital and reserves 695 677 637 580 580 721 713 707 696 696

Interest-bearing debt (net) 489 527 525 491 491 393 449 499 458 458

Working capital 195 206 171 124 124 211 193 205 172 172

Invested capital 1,195 1,208 1,170 1,060 1,060 1,123 1,175 1,216 1,162 1,162

Key figures

No. of shares (excl. treasury shares) - units 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545 3,407,545

Operating margin EBITDA in % 5,8 3,9 1.8 8,5 5,1 11,5 5,8 8,9 10.7 9,4

Operating margin EBITA in % -0,9 -3,9 -11,7 2,0 -3,4 4,5 -0,8 2,1 3,0 2,3

Operating margin EBIT in % -1,2 -4,4 -12,2 -11,3 -7,2 4,2 -1,2 1,6 2,6 1,9

Tax rate 36,9 44,1 17,6 -0,6 16,8 26,3 26,3 27,5 28.0 33.0

Earnings per share (EPS) in DKK -2,3 -4,1 -13,1 -16,5 -35,9 1,8 -1,7 -0,7 0,9 0,2

FINANCIAL HIGHLIGHTS AND KEY FIGURES PER QUARTER

77

amounts in DKKm

Development in income statement per quarter (selected items)

2004 2003


(unaud.) (unaud.) (unaud.) (unaud.) (aud.) (unaud.) (unaud.) (unaud.) (unaud.) (aud.)

Revenue 433 385 390 434 1,642 376 344 376 429 1,525

Production costs -327 -306 -292 -317 -1,243 -264 -253 -278 -319 -1,114

Gross profit 105 79 98 116 399 113 90 98 111 411

Distribution and sales costs -82 -75 -75 -81 -313 -75 -72 -73 -73 -293

Administrative expenses -28 -19 -20 -26 -93 -21 -21 -18 -26 -87

Restructuring - - -50 - -50 - - - - -

Goodwill amortisation and impairment -2 -2 -2 -57 -62 -1 -1 -2 -2 -6

Operating result (EBIT) -5 -17 -47 -49 -118 16 -4 6 11 29

Interest income and expense and similar items, net -7 -8 -7 -7 -29 -8 -4 -10 -8 -30

Share in profit/loss for the year to Group -8 -14 -45 -56 -122 6 -6 -3 3 1

Development in balance sheet items per quarter (selected items)

2004 2003

31 March 30 June 30 Sept. 31 Dec. 31 March 30 June 30 Sept. 31 Dec.

(unaud.) (unaud.) (unaud.) (aud.) (unaud.) (unaud.) (unaud.) (aud.)

Intangible fixed assets 88 85 75 15 82 88 86 88

Property, plant and equipment 957 948 942 927 904 964 982 961

Other long-term assets 62 58 60 93 24 29 36 47

Total long-term assets 1,107 1,090 1,077 1,034 1,010 1,082 1,104 1,096

Inventories 117 117 126 112 119 123 125 114

Trade debtors 281 261 265 263 262 239 253 258

Cash at hand and in bank 84 53 32 49 57 28 62 67

Total short-term assets 539 496 478 470 502 451 514 498

Total assets 1,647 1,587 1,555 1,504 1,512 1,533 1,618 1,593

Capital and reserves 695 677 637 580 721 713 707 696

Total long-term obligations 501 456 529 522 334 437 432 423

Trade payables 94 91 108 122 97 88 92 109

Total short-term obligations 437 441 376 390 363 284 378 370

Total obligations 938 897 904 911 697 721 809 793

Total liabilities 1,647 1,587 1,555 1,504 1,512 1,533 1,618 1,593


78

amounts in DKKm

Development in revenue per quarter

2004 2003



Revenue

- Egg & Fruit Packaging Europe 248 216 222 254 940 227 211 215 235 888

- Egg & Fruit Packaging North America 37 35 36 37 144 23 23 27 34 106

- Egg & Fruit Packaging South America 37 33 30 30 130 32 31 30 30 124

- Industrial Packaging 46 40 50 55 191 38 33 39 47 158

- Skjern Papirfabrik A/S 32 31 31 32 125 34 30 29 32 125

- CHP plant 15 11 9 16 50 16 10 8 15 49

- Others 18 20 13 9 61 6 6 27 37 75

Total 433 385 390 434 1,642 376 344 376 429 1,525

Revenue excl. North America 396 351 354 397 1,498 354 321 349 395 1,419

Development in operating result (EBIT) per quarter

2004 2003



Operating result (EBIT)

- Egg & Fruit Packaging Europe 30 17 21 25 94 26 19 22 23 89

- Egg & Fruit Packaging North America -34 -35 -21 -73 **) -162 -5 -8 -16 -21 -50

- Egg & Fruit Packaging South America 1 1 0 1 2 -3 -5 -3 -1 -11

- Industrial Packaging 10 4 11 13 38 8 4 7 9 28

- Skjern Papirfabrik A/S 1 1 1 2 6 3 1 1 1 7

- CHP plant 2 1 0 3 7 2 0 0 3 5

- Others -16 -7 -60 *) -19 -103 -16 -17 -6 -2 -40

Total -5 -17 -47 -49 -118 16 -4 6 11 29

Operating result adjusted for

restructuring and North America 29 18 23 24 94 21 4 22 32 79


*) Operating result includes restructuring costs of DKKm 50**) Operating result includes goodwill write-down in North America of DKKm 56

CON TENTS

Financial highlights and key figures 3

To Hartmann’s stakeholders 4

Group profile 6

Management report 2004 8

Facts about the divisions 16

Egg & Fruit Packaging Europe 16

Egg & Fruit Packaging North America 17

Egg & Fruit Packaging South America 18

Industrial Packaging 19

Outlook 2005 20

Strategy and targets 2005-2007 22

Risk Management 26

Sustainable development 30

The management of the Hartmann Group 32

Investor relations 34

Board of Directors and Group Executive Committee 38

Annual accounts 43


Statement by the Board of Directors & the auditors 48

Income statement 49

Balance - assets 50



Movement in capital and reserves 53


Notes 55


HARTMANN GROUP DIRECTORY

DEFINITIONS OF KEY FIGURES

Total short-term assets – receivable in corporation tax – cash at bank and in hand – pension obligations – prepayments from customers – trade creditors – payable to associates – provisions – other debt

NWC + property, plant and equipment + intangible assets + deferred tax asset + receivable in corporation tax – deferred tax - government grants – corporation tax


Average no. of shares

The calculation of EPS, diluted is adjusted for outstanding share options

Share in profit/loss for the year to Group × 100

Average capital and reserves

EBIT

Average invested capital

Operating profit × 100

Revenue


No. of shares (less treasury shares) at year-end

Listed price


Total amount paid out in dividend × 100


Interest-bearing debt (net) × 100


Cash flows from operating activities

Average no. of shares (less treasury shares)

Net working capital (NWC)

Invested capital (IC)


Return on equity

Return on invested capital

Profit margin (EBIT)

Carrying amount per share

Price earnings

Pay-out ratio

Gearing

Cash flow per share

International financial reporting standardsThe Annual Report 2004 has been prepared in ac-cordance with the International Financial Reporting Standards (IFRS) and any further reporting require-ments for listed companies.

Forward-looking statementsThe forward-looking statements in this report re-flect the current expectations of the Management of Brødrene Hartmann A/S with regard to future events and the Group’s financial performance. Statements about 2005 will inevitably be subject to uncertainties causing the actual development to dif-fer from the expectations.

Factors that might affect such expectations include a.o. – but not limited to – developments in business

trends and the financial markets, changes in legisla-tion and regulations in the markets where Brødrene Hartmann A/S has activities, changes in the demand for products and in the competitive environment, and insufficient quantities of raw materials for the production. See also the section on Risk Manage-ment on p. 26.

The Annual Report appears in both a Danish and an English version.

In case of discrepancies between the two texts, the Danish text shall

prevail.

All trademarks, trade names and other designations emphasized in

this report/brochure are trademarks protected by and belonging to


© 2005 Brødrene Hartmann A/S

Layout Black Pencil Photos Niclas Jessen and Morten Bjarnhof Print Interprint Paper Galerie art silk. Cover 300 g. Contents 150 gPrinted with vegetable-based ink by printing house with environmental certification and EMAS registration.

The key figures were prepared in accordance with „Recommendations and key figures 2005“ from Association of Danish

Financial Analysts (ADFA). This means an adjusted definition of working capital where tax items are no longer included

in the balance. Furthermore, return on capital is solely called ROIC, not ROCE. Other conditions unchanged.

Head office:


Klampenborgvej 203

DK-2800 Kgs. Lyngby, Denmark

Phone: +45 45 87 50 30

Fax: +45 45 87 78 58



Production plants:

Europe:Brødrene Hartmann A/S

Hartmannsvej 2

DK-6270 Tønder, Denmark

Phone: +45 74 72 85 00

Fax: +45 74 72 85 29


Hartmann Hungary LLC

HU-2941 Ács, Ipar út 1, Pf.:2,

Hungary

Phone: +36 34 595 100

Fax: +36 34 595 101


Hartmann papirna ambalaža d.o.o.

Dravska bb

HR-48000 Koprivnica, Croatia

Phone: +385 48 658 800

Fax: +385 48 658 808


Hartmann-Schwedt GmbH

Kuhheide 32

DE-16303 Schwedt/Oder

Germany

Phone: +49 3332 26550

Fax: +49 3332 265529


Hartmann-Varkaus Oy

Satakunnankatu 10

PO Box 265

FIN-78201 Varkaus, Finland

Phone: +358 2046 1460

Fax: +358 2046 32 146


Skjern Papirfabrik A/S

Birkvej 14

DK-6900 Skjern, Denmark

Phone: +45 97 35 11 55

Fax: +45 97 35 09 09


North and South America:Hartmann Canada Inc.

58 Frank Street

P.O. Box 1328

Brantford, Ontario N3T 5T6

Canada

Phone: +1 519 753 8427

Fax: +1 519 753 8142


Hartmann Embalagens do Brasil Ltda.

Estrada das Pitas, 431

CEP 18087-190

Sorocaba, S.P., Brazil

Phone: +55 15 3238 3200

Fax: +55 15 3228 2733


http://www.hartmannbrasil.com.br

Hartmann Embalagens

Montes Claros Ltda.

Rua H. Andersen, 311

Bairro Industrial

CEP 39404-005

Montes Claros, M.G., Brazil

Phone: +55 38 3222 7616

Fax: +55 38 3222 7476

Hartmann-PPM Argentina S.R.L.

Ruta Nac. 151 - Km. 0,5 - C.C.92

AR-8324 Cipolletti

Rio Negro, Argentina

Phone: +54 299 478 1567

Fax: +54 299 478 2343


Middle and Far East:Hartmann-Mai Ltd.

10 Haorzim Street

Industrial Zone

P.O.B. 13456

IL-42138 Nathanya, Israel

Phone: +972 9 862 1845

Fax: +972 9 862 4467


Hartmann Malaysia Sdn. Bhd.

PLO 548, Jalan Keluli 11

Kawasan Perindustrian Pasir Gudang

81700 Pasir Gudang

Johor, Malaysia

Phone: +60 7 253 2200

Fax: +60 7 252 3300

E-mail: jen@hartmann-malaysia.

com.my

Sales offices:

Europe:Hartmann France S.a.r.l.

Le Bailliage du Roi

3, rue du Bailliage

FR-78000 Versailles, France

Phone: +33 1 39 51 21 41

Fax: +33 1 30 21 50 83


http://www.hartmann-france.fr

Hartmann Ltd.

Serbia & Monte Negro

S&CG-21000 Novi Sad

Olge Petrov 32, Srbija i Crna Gora

Phone: +381 21 474 0768

Fax: +381 21 474 0769


Hartmann Polska Sp. z o.o.

ul. Mala 5

PL-66-400 Gorzów Wlkp.

Poland

Phone: +48 95 7 28 19 82

Fax: +48 95 7 28 19 84


http://www.hartmann-polska.pl

Hartmann (UK) Ltd.

Exchange House

Exchange Square

Beccles

Suffolk NR34 9HH, England

Phone: +44 1502 71 71 01

Fax: +44 1502 71 38 31


Hartmann Verpackung AG

Buggenrain 5

CH-6043 Adligenswil-Luzern

Switzerland

Phone: +41 41 370 7038

Fax: +41 41 370 7028


http://www.hartmann-suisse.ch

Hartmann Verpackung GmbH

Hauptstrasse 71-79

DE-65760 Eschborn, Germany

Phone: +49 6196 9320

Fax: +49 6196 932 109


http://www.hartmannverpackung.de

North and South America:Hartmann-PPM Argentina S.R.L.

Av. Alicia Moreau de Justo 1750, 1-B

Puerto Madero

AR-1107 Buenos Aires, Argentina

Phone: +54 11 4314 1032

Fax: +54 11 4314 1027


William L. Berndt

Key Account Manager

1631 Stratton Pond Lane

Schaumburg, Illinois 60194

Phone: +1 847 466 5444

Fax: +1 847 466 5854


Scott M. Davis

Key Account Manager

10 East Trillium Circle

The Woodlands, Texas 77381

Phone: +1 409 273 3368

Fax: +1 409 273 3369


Jannik Holm

Vice President Sales & Marketing

1 Hartfield Boulevard

East Windsor, CT 06088

Phone: +1 860 831 0023

Fax: +1 860 831 0026


Middle and Far East:Nihon Hartmann K.K.

August House 3F

3-23-5 Uehara

Shibuya-ku

Tokyo 151-0064, Japan

Phone: +81 3 3465 3011

Fax: +81 3 3465 3380


Peter High

Sales Agent

High Marketing Ltd.

P.O. Box 109 582, Newmarket

Auckland 1031, New Zealand

Phone: +64 21 999 892

Fax: +64 21 650 205


Richard Liu

Key Account Manager

Rm 301, #500

Xiang Yang South Road, Shanghai,

China, Zipcode 200031

Phone: +86 21 54 65 68 36

Fax: +86 21 64 73 66 03


Loh Lim Hock

Key Account Manager

Suite 39.1.13

No 39, Jalan Kenari 17C

Bandar Puchong Jaya

47100 Puchong

Selangor Darul Ehsan, Malaysia

Phone: +603 8076 7606

Fax: +603 8070 7907

E-mail: llh@hartmann-malaysia.

com.my

Jaime G. Joson

Key Account Manager

No 8 Evangelista St. Maliksi 1, Bacoor

Cavite, The Philippines

Phone: +63 46 417 7612

Fax: +63 46 417 7209

E-mail: jgj@hartmann-malaysia.

com.my

Wara Kamchaisatian

Manager

134/2 Charoenmuang Road

Rongmuang, Pathumwan

Bangkok 10330, Thailand

Phone: +66 1833 1910

E-mail: wrk@hartmann-malaysia.

com.my

protecting values

THE HARTMANN WORLD
















www.hartmann.dk

HA

RT

MA

NN

AN

NU

AL

RE

PO

RT

2004

Production sites













Klampenborgvej 203

DK-2800 Kgs. Lyngby

Denmark

Phone: +45 45 87 50 30

Fax: +45 45 87 78 58



CVR-nr. 63 04 96 11


Argentina


Brazil


Canada






Crotia





than 20 countries annual report 2004

Documents